Tech Mahindra’s open offer to Satyam shareholders closes

When Tech Mahindra emerged as the successful bidder for the scam-ridden software company Satyam Computer Services, it seemed like the subsequent open offer would be a success.

But Satyam’s share price rose significantly, in the interim, as investors began to regain some confidence in its future, especially after its provisional results for the third quarter were made public. The company’s profitability was much better than what was feared. While the open offer was at Rs 58 the share closed today, the last day of the offer, at Rs 74.

The bidding process had a provision for such an eventuality. It allowed the successful bidder to subscribe to as much of Satyam’s capital, as is needed to take its stake up to 51% from 31%. If Tech Mahindra gets, say, a 5% stake in Satyam from the open offer, it will then subscribe to the balance 15% in fresh shares.

The share allotment will be done at the same price of Rs 58. A fresh issue of shares will lead to a dilution in Satyam’s equity capital. But the money will flow into the company unlike in an open offer, where the shareholders would have got the funds. In its present cash-strapped condition, a cash infusion is more beneficial, even at the cost of some earnings erosion.

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