Troubled Satyam Appoints DSP Merrill Lynch as Advisor
Facing investors’ wrath over a now-abandoned controversial deal and
its plummeting share price, beleaguered Satyam Computer Services, a
global tech service provider from India, has decided to take some
corrective measures. It has appointed DSP Merrill Lynch as external
advisor and will hold the next Board meeting on January 10, 2009.
Earlier this month on Dec. 16, Satyam had announced that its Board of
Directors approved proposals to acquire a 100% stake in Maytas
Properties and a 51% share in Maytas Infra. Maytas is engaged in
infrastructure construction and asset development. The total payment
for both the acquisitions was estimated to be US$ 1.6 billion – $ 1.3
billion for the 100% stake in Maytas Properties and $ 0.3 billion for
the 51% stake in Maytas Infra.
On
this move, Satyam’s shares dropped by nearly 40% last week to about
Rs.135, as investors were angry over a technology company spending
money on the construction outfit in which Satyam’s
management has stakes. And questions were raised about Satyam’s
corporate governance.
Satyam, the 4th largest Indian software
exporter, is also listed on the New York Stock Exchange.
On Dec. 17, succumbing under investors’ objections
and its bad stock levels, Satyam dragged its feet back and shelved the
planned acquisition deal.
At that time,
Satyam chairman,
B. Ramalinga Raju
had said, “We have been surprised by the market reaction to this
decision even though we were quite positive about the merits of the
acquisition. However, in deference to the views expressed by many
investors, we have decided to call off these acquisitions.”
Now,
the company is considering some actions to come out of the troubled
situation and regain market confidence. These include strengthening
the Satyam's governance structure, including increasing the size and
altering the composition of the board and addressing issues about
possible dilution of the promoter's stake in the company.
"Satyam's
Board of Directors recognizes the serious nature of certain questions
raised by the events of the last two weeks," says Raju. "In order to
ensure that these questions are properly addressed, and that the
interests of stakeholders are fully and carefully considered, Satyam
has decided to broaden the scope of its deliberations beyond a
possible buy-back of its stock."
Further, Satyam informs that the stake in the company held by the
promoters may have been reduced as a result of routine actions by the
promoters’ lenders. The promoters have informed Satyam that all their
shares in the company were pledged with institutional lenders, and
that some lenders may exercise or may have exercised their option to
liquidate shares at their discretion to cover margin calls.
