Satyam, Tech Mahindra to merge; swap ratio set

Mahindra Satyam will merge with parent Tech Mahindra to create the fifth largest software services exporter by market value and helping it compete with biggers rivals for large outsourcing deals.

Mahindra Satyam will merge with parent Tech Mahindra to create the fifth largest software services exporter by market value and helping it compete with biggers rivals for large outsourcing deals.

File-photo-of-Mahindra-Satyam-CEO-CP-Gurnani-speaking-during-a-press-conference-in-Hyderabad-AFP-Noah-Seelam

The merger will result in combined revenue of about $2.4 billion and more than 350 clients across different geographies and industrial sectors, Tech Mahindra said in a statement on Wednesday after a board meeting to approve the merger.

The move ends a tumultuous journey for Satyam, which had come on the brink of collapse after its former chairman and founder Ramalinga Raju said in January 2009 that profits had been overstated and assets falsified in the country's biggest accounting fraud.

Hyderabad-based Satyam, which saw many of its clients and staff exit after revelation of the fraud, was sold in April 2009 to Tech Mahindra, a unit of Mahindra & Mahindra, in an auction and was later renamed as Mahindra Satyam.

As part of the merger process, investors will get one Tech Mahindra stock for every 8.5 shares of Satyam, the companies said.

The combined entity will be able to better compete with local bigger rivals such as sector leader Tata Consultancy Services and No. 2 exporter Infosys for large outsourcing contracts from global corporations, analysts said.

Shares in Tech Mahindra, which the market values at $1.6 billion, was trading up 2.3% at 663.35 rupees at 0517 GMT, while Satyam was down 0.5% at 73.75 rupees. The broader Mumbai market was trading 0.1% higher.

Tech Mahindra, which provides IT services and solutions to telecoms companies, said its parent Mahindra group will own 26.3% in the merged entity, while Britain's former telephone monopoly BT will hold 12.8% stake.

Tech Mahindra's founder Mahindra group held 48% stake in the technology company, while BT owned 23% at the end of December, according to the stock exchange data.