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SEBI may relax takeover pricing rules for L&T's acquisition of Satyam news
02 February 2009

The Securities and Exchange Board of India (SEBI) is meeting tonight to take a decision on a plea by engineering and construction major Larsen and Toubro and the new board of Satyam Computer Services for relaxation in open offer rules for the takeover of scam-hit information technology major.

L&T, which is currently the largest shareholder of Satyam Computer, also seems to be the current favourite for acquiring the company and analysts expect the market regulator to relax takeover pricing rules for the fraud-hit company.

L&T is estimated to have acquired a 12 per cent stake in Satyam Computer Services for around Rs700 crore ($140 million) and the government-appointed board of Satyam is seeking a strategic investor for the firm.

L&T raised its stake to 12 per cent from 4 per cent when Satyam shares were under Rs40, gaining an average Rs80 a share.

Last week, buy-out firm Fidelity also raised its holding in Satyam computer to 6.8 per cent and since then Fidelity has increased its stake further.

State-run Life Insurance Corp, which is the largest shareholder in L&T with a 17.4 per cent stake at the end of 2008, also owns 4.3 per cent in Satyam.

Satyam's market value has plunged to about Rs4000 crore ($800 million) from Rs35,000 crore ($7 billion) in May 2008.

L&T has been looking for big prey to grow their IT business and the acquisition of Satyam and a merger with L&T Infotech will serve the purpose.

L&T could increase its stake further to 15 per cent, beyond which it would have to make an open offer for another 20 per cent of the company - at the average share price over the last six months, according to the SEBI takeover rules.

Under the SEBI takeover rules, L&T would have to offer a price based on the six-month average share price of Satyam, which would  work out to over Rs300, while the average price over 10 days would work out to about Rs38 a share.

Reports, meanwhile, said SEBI is considering a proposal to link the open offer price to the average price of the stock in a shorter and more recent period of two weeks.

Potential bidders win have to improve upon this price while seeking to gain management control of the firm in a possibly an open-bidding process.

The SEBI board will also discuss ways of compensating shareholders retrospectively for large amounts of cash siphoned off by the Satyam promoters once recovered.

The SEBI board is meeting on Monday to consider the request made by the new Satyam board constituted by the government to ease the rules relating to open offer pricing.

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SEBI may relax takeover pricing rules for L&T's acquisition of Satyam