Tech Mahindra + Mahindra Satyam: A Wealth-Creating Marriage
4/5/2012 10:54 AM Thursday
This is probably the beginning of the end of one of the most dramatic corporate events that unfolded in India with the confession of Ramalinga Raju, the former chairman of Satyam about the accounting fraud in the company (See box: Journey Till Date). The end started with the Board of Directors of Tech Mahindra (Tech M) and Mahindra Satyam (Satyam) approving the merger of both the companies along with their wholly-owned subsidiaries, Venturbay Consultants, C&S System Technologies, CanvasM Technologies and Mahindra Logisoft Business Solutions. The swap ratio approved by the board of both the companies is 2:17. This means that a shareholder would get two shares of Tech M (face value of Rs 10 each) for every 17 shares of Satyam (face value of Rs 2 each) held by him/her. The merger process is likely to take up to six to nine months to complete, and will be effective from April 1, 2011.
We asked C P Gurnani, CEO, Mahindra Satyam, as to what prompted such a move. According to him, “The decision of merging the two companies was taken after an extensive and careful consideration about what we need to do in the changing and competitive environment”. Gurnani further added, “There were many milestones, small and big, on the way such as restatement of accounts, our first acquisition, reinforcing the confidence of customers and associates that we achieved, and only then did we go in for the merger of the two entities”.
Moreover, the lacklustre financial performance of Tech Mahindra also seems to be one of the reasons for the announcement of the merger. at this moment. We did ask Gurnani as to whether the timing of this merger was meant to boost the performance of an otherwise laggard Tech M. On this, he commented, “Over the last three years, Mahindra Satyam’s business has revived and is on a growth path. Right now, there is enhanced visibility on legacy issues and the liabilities of Mahindra Satyam. Hence this was an appropriate time for the merger.”
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