The Indian government's Company Law Board (CLB) on Thursday approved the acquisition by BT-backed Tech Mahindra of a 51 per cent stake in troubled Indian outsourcer Satyam Computer Services.
Venturbay Consultants, a subsidiary controlled by Tech Mahindra, emerged as the highest bidder to acquire a controlling stake in Satyam on Monday.
In the first phase, Tech Mahindra, which is 31 per cent owned by BT, will be paying Indian Rupees 17.6 billion (US$354 million) by April 21 for a 31 per cent stake in Satyam, through the preferential issue of new equity.
Tech Mahindra will also have to make a public offer to other Satyam shareholders to buy another 20 per cent of the company at the price it will pay for the first round.
After the transaction for the 31 per cent equity is complete, and Tech Mahindra also deposits in an escrow account the funds required for the acquisition of the balance 20 per cent, it will be allowed to nominate four members to the Satyam board, the CLB said.
The six government-nominated members of the Satyam board will however continue until further notice, the CLB said.
The government-nominated board has steered Satyam through the financial crisis triggered off by the company's founder B. Ramalinga Raju who said in January that Satyam had inflated profits for several years.
Satyam is working on restating its finances for the last six years, and in the interim the company has not yet announced its results for the third quarter of last year.
The CLB on Thursday also gave Satyam an extension until the end of this year to report earnings for the October to December quarter, and subsequent quarters.
The acquisition by Tech Mahindra of a majority stake in Satyam through Venturbay also comes with a number of conditions.
The CLB has stipulated a lock- in period of three years for the shares in Satyam purchased by Venturbay either through the preferential or public offer.
Venturbay is also not allowed to dispose or sell any material asset of the company, and also Satyam as an enterprise, for a period of two years from the date of completion of the public offer, without the approval of the shareholders and of the CLB.
Tech Mahindra will have to continue to control Venturbay for a period of three years from the date of preferential allotment if any, without the prior approval of the CLB.
The acquisition will be funded through a combination of internal accruals and debt, Tech Mahindra said earlier this week.