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Thursday, 22 March 2012 00:02 - - {{hitsCtrl.values.hits}}
REUTERS: Mahindra Satyam will merge with parent Tech Mahindra to create the fifth largest software services exporter by market value and helping it compete with bigger rivals for large outsourcing deals.
The merger will result in combined revenue of about $2.4 billion and more than 350 clients across different geographies and industrial sectors, Tech Mahindra said in a statement on Wednesday after a board meeting to approve the merger. The move ends a tumultuous journey for Satyam, which had come on the brink of collapse after its former chairman and founder Ramalinga Raju said in January 2009 that profits had been overstated and assets falsified in the country’s biggest accounting fraud.
Hyderabad-based Satyam, which saw many of its clients and staff exit after revelation of the fraud, was sold in April 2009 to Tech Mahindra, a unit of Mahindra and Mahindra (MAHM.NS), in an auction and was later renamed as Mahindra Satyam.
As part of the merger process, investors will get one Tech Mahindra stock for every 8.5 shares of Satyam, the companies said.
The combined entity will be able to better compete with local bigger rivals such as sector leader Tata Consultancy Services and number two exporter Infosys for large outsourcing contracts from global corporations, analysts said.
Shares in Tech Mahindra, which the market values at $1.6 billion, was trading up 2.3 per cent at 663.35 rupees at 0517 GMT, while Satyam was down 0.5 per cent at 73.75 rupees. The broader Mumbai market was trading 0.1 per cent higher.
Tech Mahindra, which provides IT services and solutions to telecoms companies, said its parent Mahindra group will own 26.3 per cent in the merged entity, while Britain’s former telephone monopoly BT will hold 12.8 per cent stake.
Tech Mahindra’s founder Mahindra group held 48 per cent stake in the technology company, while BT owned 23 per cent at the end of December, according to the stock exchange data.
