Tech Mahindra deposits $582 million for Satyam stake, meets employees for first timeBy Erika Kinetz, Gaea News Network
Monday, April 20, 2009
Tech Mahindra deposits $582M for Satyam stake
MUMBAI, India — The new owners of Satyam Computer Services Ltd. made their first visit to the company’s Hyderabad headquarters Monday, speaking with employees just hours after depositing $582 million to buy a 51 percent stake in the troubled outsourcing giant.
Tech Mahindra saved Satyam, once India’s fourth largest outsourcing firm, from what looked like imminent demise when it agreed to purchase Satyam last week.
Satyam, which serves some of the biggest names in U.S. business, including General Motors and Citigroup, nearly collapsed after its founder confessed to a $1 billion fraud in January. Investigations are still ongoing to determine the extent of the damage and nine arrests have been made.
Tech Mahindra said Monday that its wholly owned subsidiary, Venturbay Consultants Pvt Ltd, deposited 29.10 billion rupees ($582 million) in an escrow account Monday morning to fund the purchase.
It has already bought shares representing 31 percent of the company and plans to make an offer on the open market for another 20 percent of outstanding shares Tuesday.
Tech Mahindra said it paid 7 billion rupees ($143.5 million) in cash and funded the rest of the acquisition with a combination of debt and loans strung together in just 72 hours. Officials did not detail the terms of the financing.
Waves of anxiety have been sweeping through Satyam’s ranks about whether and to what extent Mahindra will reduce the 48,000-strong staff.
The board said Monday that 100 key employees would be retained for a year to ensure continuity for clients.
Asked about job cuts at a press conference Monday, Tech Mahindra chief executive Vineet Nayyar said that bringing Satyam back to “financial health is our first priority.” It has not ruled out the possibility of job cuts.
India’s Economic Times newspaper reported Saturday that Satyam was considering trimming its work force by ten percent.
The board said it hoped to instate a new chief financial officer within a few weeks, but did not say whether the current chief executive, AS Murthy, would remain in place.
Tech Mahindra executives said that for the foreseeable future Satyam would remain an independent entity.
Satyam shares closed up 4.5 percent, at 47.55 rupees a share, in Mumbai, while the Sensex index shed 0.4 percent to close at 10,979.5 points.