Tech Mahindra offer for Satyam gets lukewarm response

Tech Mahindra's public offer to acquire an additional 20% stake in Mahindra Satyam ended on July 1 with the company getting a very lukewarm response from investors. As a result, Tech Mahindra will now exercise the option of increasing its stake through the preferential allotment route. On the conclusion of the mandatory open offer to shareholders of Mahindra Satyam, the new owner has a little over 42% stake in the Hyderabad-based company, as against the original plan of acquiring a total of 51% of the equity. The response to the open offer was poor, as the secondary market price of Mahindra Satyam was well above Rs70 per share during the period of open offer (between June 12 and July 1), whereas the price announced by Tech Mahindra was Rs58 per share. On Wednesday, Satyam’s share price closed at Rs 71.55. Tech Mahindra had acquired 302.76mn shares, equivalent to 31% of the expanded equity capital, for Rs17.56bn. In addition, it announced an open offer another 199mn shares, equivalent to 20% of the equity capital of Satyam, under the SEBI takeover code. A successful open offer would have increased the total acquisition cost to Rs29.12bn.