Bidding Starts For Satyam

Troubled outsourcer is now officially on the block.

Paul McDougall, Editor At Large, InformationWeek

March 9, 2009

2 Min Read

Satyam on Monday began taking bids in an effort to secure new ownership that the outsourcer hopes will distance it from a corner-office-led accounting scandal that's been dubbed "India's Enron."

After receiving regulatory permission Friday to launch the auction, Satyam's board is looking for an investor that will take a 51% majority stake in the firm. The process calls for the winning investor to issue new shares representing 31% of Satyam's share capital while purchasing 20% of the company's enhanced share capital.

Some interested parties have already begun to emerge. Indian construction and engineering company Larsen & Toubro has informed Satyam's board of its intention to bid for the outsourcer, an L&T spokesman told The Times Of India.

Other reports suggest that IBM may be interested in tendering an offer, given its already strong presence in India. IBM typically does not comment on such speculation.

Satyam last month retained investment bankers Goldman Sachs and Avendus to help it with the sale. At the time, the company had already received "several proposals from corporate entities and from private equity firms," board member T.N. Manoharan said. "Some are interested in evaluating Satyam as an integrated entity, while others have expressed interest in portions of Satyam's business."

The Indian government has ruled that Satyam cannot be sold off in piece parts, so any buyout would have to involve the whole company.

On Jan. 7, Satyam chairman Ramalinga Raju admitted falsifying the company's cash position by as much as $1 billion while overstating quarterly earnings and revenue by up to 28%. Satyam also may have faked employee numbers and other data. Raju tendered his resignation and has since been arrested and jailed.

Some customers have fled the company in light of the scandal. India's Economic Times reported that U.S. heavy equipment manufacturer Caterpillar may terminate its deal with the Satyam. Insurer State Farm has said it would seek an end to its outsourcing contract with the company.

Satyam is now facing lawsuits from shareholders who claim they were misled about the company's financial situation.

InformationWeek talked with Indian outsourcing company execs as they dealt with fallout from the Satyam financial fiasco. Download the report here.

About the Author(s)

Paul McDougall

Editor At Large, InformationWeek

Paul McDougall is a former editor for InformationWeek.

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