Tech Mahindra offers Satyam cashless union

NEW DELHI: Tech Mahindra, a Mahindra & Mahindra group company, is understood to have approached Satyam Computer Services, India���s fourth-largest IT services company, for a cashless merger, according to a person close to the development.

If the transaction goes through, it will involve Tech Mahindra merging into Satyam, creating the third-largest IT company in the country.

The management control of the merged entity will be in the hands of M&M, said this person on condition of anonymity. When contacted, a senior executive of M&M, which owns 44% in Tech Mahindra, said: ���Anything that offers strategic value to Tech Mahindra would be of interest to the group.��� However, the official refused to comment on whether specific talks had been initiated between the two companies.

Talks of a management change at Satyam have been doing the rounds since mid-December, following its botched attempt to take over two infrastructure companies owned by the family of Satyam���s founder Ramalinga Raju. Potential suitors are said to include homegrown HCL Technologies, foreign companies such as HP as well as private equity funds, although so far none of these companies have confirmed their interest in Satyam.



According to this source, who knows about Tech Mahindra���s interest in Satyam, the businesses of the two companies are complimentary. ���The lack of business overlap will work in the deal���s favour if it goes through,��� he added.

In market-cap terms, Tech Mahindra is roughly one-third the size of Satyam. ���The merger of Tech Mahindra into Satyam will work in the deal���s favour because it will not be a Goliath gobbling up a smaller company,��� said the person.

According to a fund manager, M&M is reportedly in touch with Merril Lynch for the purpose.

For the merger to happen, in addition to Mr Raju who now owns around 4.5% in Satyam, some large institutional investors will also have to agree to Tech Mahindra���s proposal. Institutional investors and mutual funds together own 61% of Satyam. The big investors in Satyam ��� Aberdeen, ICICI Prudential, Lazard and Fidelity ��� together own 13.16% in the company.