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Satyam: IBM, WL Ross tie-up buzz gets stronger

BS Reporters in Hyderabad/New Delhi/Mumbai | April 02, 2009 09:54 IST

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Even as the shroud of secrecy over the bidding process for Satyam Computer Services [Get Quote] stays, the buzz around two independent bidders -- IT giant IBM and Wilbur Ross & Co, the private equity firm promoted by billionaire investor Wilbur Ross -- joining hands has grown stronger over the past couple of days.

The buzz refuses to die down even though other PE players, investment bankers and analysts say such an alliance is highly unlikely.

"IBM and WL Ross entering into an agreement is not possible, as IBM is a listed company and cannot do something like this. But WL Ross may look at selling to IBM if it is successful in getting Satyam," said a banker not connected with the case.

On the litigation issue, he said, "Litigation is not a big issue for WL Ross and there is a perception that they will be able to find their way out of the litigation maze. The idea is to buy Satyam and stay invested for three-four years, work on it by getting a new management, and then sell to a player like IBM. In all probability, they may be working with IBM on this," a leading PE player said on condition of anonymity.

While IBM (which is understood to be in the race through a law firm) said "it does not comment on speculation", a highly-placed source in the company said, "IBM has traditionally never joined hands with funds to make an acquisition". Besides we have a lot of cash to go alone, he added.

Wilbur Ross, meanwhile, is understood to have completed the due diligence of the scam-tainted IT company. When contacted, a company official declined comment.

Ross, known for restructuring failed companies, specialises in leveraged buyouts. He first invested in India in 2006, when he put $37 million in OCM India. His second investment was $100 million in SpiceJet in August 2008.

Satyam, incidentally, is expected to prune its revenues by 10-15 per cent before it announces its audited results for the current financial year, according to sources privy to the development.

The IT outsourcing firm's revenues for the second quarter of FY09 stood at Rs 2,819.29 crore (Rs 28.19 billion), as against Rs 2,031.72 crore (Rs 20.31 billion) in the corresponding quarter last year, a year-on-year growth of 39 per cent.

The government-appointed board of Satyam has sought an extension till June 30 to disclose the company's third quarter (October-December) results, which are currently being restated following the accounting scam that broke out in January this year. "An approval from the exchanges is expected anytime now," said a company official.

"The action has now shifted to Mumbai from where the Satyam board members, along with the company's investment bankers, Goldman Sachs and Avendus Capital, are participating in the process through virtual conferences," said a source from Satyam.

The bidders for Satyam can inspect the documents virtually, using video conferencing and the internet through Satyam "data rooms".

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