Tech Mahindra’s acquisition of Satyam Computer Services is likely to proceed smoothly, as it is a government nominated board at the helm of affairs. That was evident in the speed with which the Company Law Board approved the preferential allotment to Tech Mahindra, to give it a 31% stake in Satyam.
Tech Mahindra can appoint four nominees on Satyam’s board while the existing six government nominees will continue to hold their positions. The new directors will get the same immunity that the existing directors have from any litigation in the country.
Venturbay is the SPV through which the acquisition is being made. The CLB has reiterated some conditions:
- it cannot sell the shares for three years
- it cannot strip Satyam’s assets or sell the company for two years without getting shareholder and CLB approval, and
- it cannot sell control in Venturbay for three years, without taking CLB approval.
Satyam has till December 2009 to restate its financials and is free not to report any financial results, due till then, including quarterly results. If Satyam chooses to exercise that option, then investors will have no way of knowing how the company is performing till nine months from now. That will be rather unfortunate as investors would want to know if it is worthwhile to hold on to Satyam’s shares. It should be possible to report quarterly results in FY’10, with a caveat that a restatement of past financial results could result in changes to the numbers.