Ramalinga Raju and family own just 8.6% of Satyam and he was trying to transfer 1 billion from Satyam to the Maytas.
"The deal outraged investors because Satyam, which is only 8.6 per cent owned by Mr Raju's family, elected to buy out Maytas Properties and Maytas Infra without seeking independent shareholder approval.
Mr Raju's family hold stakes of 36.6 per cent in Maytas Infra and 35 per cent in Maytas Properties."
Published: December 17 2008 07:38 | Last updated: December 17 2008 07:38
Shares of India's fourth largest information technology company, Satyam Computer Services, plunged on Wednesday as angry investors dumped the stock over its aborted attempt to buy companies controlled by the chairman's family.
Satyam abruptly cancelled the proposed $1.6bn acquisition of real estate and infrastructure companies Maytas Properties and Maytas Infra only hours after announcing the deal late Tuesday after a revolt from shareholders.
Shares of the group, India's fourth largest software exporter by revenue, were down 27.37 per cent at Rs164.50 after earlier dropping 30.8 per cent as investor confidence in the group plummeted despite the deal being abandoned.
Citigroup downgraded Satyam to sell, slashing its target price for the Hyderabad-based company to Rs170 per share from Rs305.
"While the deal cancellation is positive, investor confidence has been dented," the brokerage said in a client note.
The deal outraged investors because Satyam, which is only 8.6 per cent owned by Mr Raju's family, elected to buy out Maytas Properties and Maytas Infra without seeking shareholder approval.
Mr Raju's family hold stakes of 36.6 per cent in Maytas Infra and 35 per cent in Maytas Properties.
"We have been surprised by the market reaction to this decision even though we were quite positive about the merits of the acquisition," Satyam chairman B. Ramalinga Raju said in a statement.
Satyam argued that the deal would enable the group to diversify away from the information technology services sector but investors saw it as a bailout of the founding family's property companies at a time when real estate is slowing rapidly.
The deal would also have consumed Satyam's $1.2bn of cash, money that investors believe could have been better used for acquisitions in the computer services sector during the downturn.
India's business media, which normally lauds large acquisitions, was uncharacteristically scathing of Satyam on Wednesday.
"The Satyam promoters will not be able to live this one down," wrote The Economic Times, India's biggest English language business newspaper, in a front page comment piece.
But Mr Raju said the company had not expected such a strong reaction from investors.
"In deference to the views expressed by many investors, we have decided to call off these acquisitions," he said in the statement.
i think this sort of thing happens in indian companies all the time, as they are controlled by the original entrepreneurs with only a small stake. the other directors go along with what the entrepreneurs want. what do you think reliance and even tata does?
satyam's error was doing this in a visible manner. if they had been advised better by their investment bankers, they could have hidden this in a thicket of cross-holdings, and nobody would have been the wiser.
it is especially entertaining to see anglo-americans getting all steamed up about 'corporate governance' and all that. where was your 'corporate governance' when enron did its thing? when goldman sachs et al created the biggest ponzi scheme in history, ie the sub-prime crisis? when madoff was cleaning you all out?
let us not get all sanctimonious on satyam and dump all over them. i think they made two poor decisions: one, maytas's winning bid for the hyderabad metro was too low, so they are strapped for cash and are finding it difficult to raise funds in the illiquid market. two, satyam, instead of routing funds to maytas through murky offshore transactions and p chidambaram's favorite, p-notes, did the straightforward thing.
i feel bad for the rajus. they are good people, and were poorly served by their M&A lawyers and PR people and investment bankers. these people should have suggested the kind of shady deals i touched upon above.
Rajeev, Satyam is responsible for the money its shareholders have invested with it. Hey, if their relatives at Maytas are up the creek because of the fall in the real estate market, I'm empathetic, but shareholder money is not theirs to fritter away on the problems of relatives. They really should have known better. They're an IT company, not a real estate company, and shareholders are under no obligation to go along with some highly questionable foray into some unrelated business for the sake of familial ties. As always, the market is going to demand accountability in the end.
4 comments:
This is what has happened.
Ramalinga Raju and family own
just 8.6% of Satyam and he was trying to transfer 1 billion from Satyam to the Maytas.
"The deal outraged investors because Satyam, which is only 8.6 per
cent owned by Mr Raju's family, elected to buy out Maytas Properties
and Maytas Infra without seeking independent shareholder approval.
Mr Raju's family hold stakes of 36.6 per cent in Maytas Infra and 35
per cent in Maytas Properties."
Entire Article:
-----------------------------------------------------------------------
Satyam shares hit by investors revolt
By Joe Leahy in Mumbai
Published: December 17 2008 07:38 | Last updated: December 17 2008 07:38
Shares of India's fourth largest information technology company,
Satyam Computer Services, plunged on Wednesday as angry investors
dumped the stock over its aborted attempt to buy companies controlled
by the chairman's family.
Satyam abruptly cancelled the proposed $1.6bn acquisition of real
estate and infrastructure companies Maytas Properties and Maytas Infra
only hours after announcing the deal late Tuesday after a revolt from
shareholders.
Shares of the group, India's fourth largest software exporter by
revenue, were down 27.37 per cent at Rs164.50 after earlier dropping
30.8 per cent as investor confidence in the group plummeted despite
the deal being abandoned.
Citigroup downgraded Satyam to sell, slashing its target price for the
Hyderabad-based company to Rs170 per share from Rs305.
"While the deal cancellation is positive, investor confidence has been
dented," the brokerage said in a client note.
The deal outraged investors because Satyam, which is only 8.6 per cent
owned by Mr Raju's family, elected to buy out Maytas Properties and
Maytas Infra without seeking shareholder approval.
Mr Raju's family hold stakes of 36.6 per cent in Maytas Infra and 35
per cent in Maytas Properties.
"We have been surprised by the market reaction to this decision even
though we were quite positive about the merits of the acquisition,"
Satyam chairman B. Ramalinga Raju said in a statement.
Satyam argued that the deal would enable the group to diversify away
from the information technology services sector but investors saw it
as a bailout of the founding family's property companies at a time
when real estate is slowing rapidly.
The deal would also have consumed Satyam's $1.2bn of cash, money that
investors believe could have been better used for acquisitions in the
computer services sector during the downturn.
India's business media, which normally lauds large acquisitions, was
uncharacteristically scathing of Satyam on Wednesday.
"The Satyam promoters will not be able to live this one down," wrote
The Economic Times, India's biggest English language business
newspaper, in a front page comment piece.
But Mr Raju said the company had not expected such a strong reaction
from investors.
"In deference to the views expressed by many investors, we have
decided to call off these acquisitions," he said in the statement.
Copyright The Financial Times Limited 2008
i think this sort of thing happens in indian companies all the time, as they are controlled by the original entrepreneurs with only a small stake. the other directors go along with what the entrepreneurs want. what do you think reliance and even tata does?
satyam's error was doing this in a visible manner. if they had been advised better by their investment bankers, they could have hidden this in a thicket of cross-holdings, and nobody would have been the wiser.
it is especially entertaining to see anglo-americans getting all steamed up about 'corporate governance' and all that. where was your 'corporate governance' when enron did its thing? when goldman sachs et al created the biggest ponzi scheme in history, ie the sub-prime crisis? when madoff was cleaning you all out?
let us not get all sanctimonious on satyam and dump all over them. i think they made two poor decisions: one, maytas's winning bid for the hyderabad metro was too low, so they are strapped for cash and are finding it difficult to raise funds in the illiquid market. two, satyam, instead of routing funds to maytas through murky offshore transactions and p chidambaram's favorite, p-notes, did the straightforward thing.
i feel bad for the rajus. they are good people, and were poorly served by their M&A lawyers and PR people and investment bankers. these people should have suggested the kind of shady deals i touched upon above.
Rajeev, Satyam is responsible for the money its shareholders have invested with it. Hey, if their relatives at Maytas are up the creek because of the fall in the real estate market, I'm empathetic, but shareholder money is not theirs to fritter away on the problems of relatives. They really should have known better. They're an IT company, not a real estate company, and shareholders are under no obligation to go along with some highly questionable foray into some unrelated business for the sake of familial ties. As always, the market is going to demand accountability in the end.
mr Raju is a great person , he have such skills if he used his skills wid in SATYAM it would be the worlds biggest IT company.
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