The New York-listed IT firm said in a statement on Friday that it will offer 31% of the equity to a strategic investor through the issuance of fresh capital.
Satyam Computer Services won approval to sell a majority stake in itself as the software company at the centre of India’s biggest corporate fraud inquiry seeks to restore investor confidence and stem client defections.
The New York-listed IT firm said in a statement on Friday that it will offer 31% of the equity to a strategic investor through the issuance of fresh capital. The fresh equity will be issued to the investor through a global competitive bidding process. The government-appointed board has also decided to fix the minimum net asset requirement at $150 million for an investor to qualify to participate in the process.
Once the investor subscribes to the fresh equity, he will have to make an open offer to acquire another 20% from the investors as required by the Sebi norms. This will automatically take the investor’s holding in the company to 51%.
If the investor fails to get enough response to his open offer, which has to be done at a price at which the fresh equity in the company is acquired, Satyam’s board will then issue further equity so as to take the total holding of the investor in the company to the required 51% level.
The equity that is issued to the investor will be locked in for three years and the investor will not be able to sell his share to any other investor during the period.
Goldman Sachs and investment bank Avendus Advisors are advising Satyam’s board on the sale process.
“The company will issue another press release with more details of the competitive bidding process as soon as such details are available,” Satyam said in a statement. “The company does not intend to register any securities in the United States or to conduct a public offering of securities in the United States,” it added.
However, the company is yet to announce the details of the price at which the bidding process would be set in motion.
According to sources, some of the bidders are of the view that the government-appointed board should allow prospective bidders to decide the pricing and valuation. This means the board will have to start the bidding at the face value and the bidders in turn will quote the price at which they would want to acquire the equity. But, the source said, the formula for arriving at a pricing model is still being worked out and it would be announced shortly.
Satyam shares jumped as much as 20% to Rs 42.15 on Friday, boosting the company’s market value to nearly $550 million, but it is still a fraction of the $7 billion it was worth last May.
Meanwhile, a Hyderabad court on Friday reserved its order on a CBI plea seeking custody of B Ramalinga Raju and others for next Monday.
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