Asia Bizz: Indian Information technology provider, Tech Mahindra has planned a merger with Mahindra Group’s Mahindra Satyam. The a massive $1 billion deal is expected to create a top player in the technology services area in the Indian market, but will also affect Satyam, which had been one of India’s largest Technology outsourcing companies till now.
Satyam had more than 50,000 employees and a market capitalization of more than $7 billion, but the company- which was earlier known as Satyam Computer Services – was victimized by fraud scandals. Later in the year 2009, the co-founder and the chairman of the company confessed that he had overstated the company’s revenues, profits as well as the operating margins.
Three years back, with the stock in free fall, Tech Mahindra won a controlling piece of Satyam Computer Services, which was then renamed as Mahindra Satyam. Tech Mahindra is a joint venture between British Telecom and the Indian conglomerate Mahindra & Mahindra.
The value of the deal was $1.2 billion and the terms of the latest transaction say that Tech Mahindra will offer one of its own shares and for every 8.5 shares in Mahindra Satyam. On the other hand, Mahindra & Mahindra will own 26.3 percent of the new company created and the British Telecom will have 12.8 percent; the public share holders will hold the rest.
Tech Mahindra also stated that the transaction must be approved by the local regulators and it would permit the merged company to give competition to rivals like Infosys and Tata Consultancy Services. Overall, the business will have a revenue of $ 2.4 billion.
Anand G Mahindra the Chairman of Tech Mahindra, in a statement said, “This merger will help propel the combined entity into the top tier of Indian software and services companies.