Satyam likely to ask for full bid amount in advance

The Satyam board, which is scheduled to meet on Monday to decide on the technical and financial bids for a 51% strategic stake in the beleaguered IT firm, is likely to ask the successful bidder to deposit in advance the money in an escrow account. According to government sources, even if a successful bidder emerges on Monday, the board would not announce its name. The board will, however, ask the successful bidder to deposit the bid amount for a 31% stake as well as the amount for the remaining 20% to be acquired later through an open offer.
Sources said before announcing the name, the board would intimate the government as the board is a government-appointed one and a final decision regarding the buyer needs to be taken in consultation with the government.
As the bidding process is on, the Satyam board and the top management, in an effort to assure major clients about the continuity in management and that their interests would be protected, held conference calls with key clients over the weekend. This assumes importance as ever since the accounting fraud by the company's founder B Ramalinga Raju was unearthed, the company was taken over by a government-appointed board and once the strategic bidder is selected, it would once again witness transition at the management level.
Engineering major LandT, which already has a 12.04% stake in Satyam, Tech Mahindra , Congizant and PE firm Wilbur Ross are understood to be in the race to acquire 31% stake in the company. The successful bidder would later acquire another 20% through an open offer.
The Satyam board has invited technical and financial bids on April 13 and a decision with regard to the likely winner would be taken the same day in case of a clear-cut winner. However, the process could drag a little longer should there be need for competitive bidding.
Satyam chairman Kiran Karnik had last week rubbished all apprehensions that the bidding process is not transparent, stating that the whole process is being overseen by former chief justice SP Bharucha.
Regarding concerns over Deepak Parekh one of the board members of Satyam who is also on the board of Mahindra and Mahindra, whose tech arm Tech Mahindra is one of the frontrunners in the bidding process Karnik had said Parekh was likely to recluse himself from the decision-making process.
Assuring the prospective bidders with regard to liabilities of Satyam, Pallavi Shroff, partner, Amarchand Mangaldas, which is one of the legal counsel for Satyam, had said that the all the claims would not have to be borne by the company alone and they will be spread between the perpetrators of the company's founder and ex-chairman B Ramalinga Raju, its auditors, PwC and the company. "The company would be the last in line to take on the liabilities," she had said. Shroff had also added that it has been observed that usually the actual liability to be paid is only 10-11% of what is being claimed.
While UK-based mobile solutions company Upaid has slapped damages to the tune of $1 billion on Satyam, there could be more class-action suits in the future, which could make bidders nervous, according to analysts.
The bids for Satyam comes in the backdrop of lack of financial data and legal liabilities. Recently global IT consultancy firm Forrester Research had said in a report that it expects some bidders to exit on these grounds.
With regard to the company's clients who have been living in a cloud of uncertainty ever since the accounting scandal broke at the company, Forrester had said that the sale of a majority stake may not ring the end of insecurity. According to the report the fact that the company will have a new owner in some time brings a fresh phase of uncertainty for Satyam's clients. "To protect their own interests and ensure continuity of service, clients need to accelerate finalisation of their Plan B and keep a close watch on which firm buys Satyam to decide if and when to pull the trigger to shift to that Plan B," the report had said.