Tech Mahindra eyes Satyam

06 January 2009

The Satyam saga seems to be continuing with new twists and turns everyday. There seems to be an offer for merger from Mahindra group technology company Tech Mahindra. Unconfirmed reports say that Tech Mahindra has approached Merrill Lynch and expressed an interest in merging with Satyam Computer Services.

Merrill Lynch was appointed as an advisor for Satyam to help it find a solution to the problems the company has been facing since mid-December after the IT firm's failed bid to buy out two sister concerns promoted by Sagtyam chairman Ramalinga Raju's sons for a hefty price (See: Satyam Computer to buy out founders' property firms for Rs7,680 crore) 

If the transaction materialises, the combined entity would emerge the third-largest IT company in the country after TCS and Infosys, pushing Wipro to the fourth slot.

According to a report in The Economic Times, citing unnamed sources, the management control of the merged entity will be in the hands of M&M. A senior executive of M&M, which owns 44 per cent in Tech Mahindra, told the paper, ''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.

Tech Mahindra reported profit after tax is Rs329 crore on sales of Rs3,766 crore in the 2007-08 last financial year ended March 2008. This makes it roughly one-third the size of Satyam. However Mahindras will want to retain control of the merged form since the market sems o have lost confidence in the exisitng management.

Satyam's attractions for Tech Mahindra include big clients like General Electric and Nestle, a valuable trained staff of more than 50,000 employees, a net worth of Rs11,200 crore and sales of Rs8,130 crore for the year ended March 2008.