DealZone

from India Insight:

Dark horse Tech Mahindra wins race to acquire Satyam

Tech Mahindra, part of Indian business group Mahindra & Mahindra, won the race to acquire Satyam Computer Services on Monday, in a deal that'll help the mid-sized outsourcer gain in size and also lift clarity on Satyam's fate.

In a race that saw only a handful of bidders, Tech Mahindra beat rivals such as engineering conglomerate Larsen & Toubro and U.S.-listed Cognizant Technologies. Tech Mahindra agreed to buy a 31 percent stake in Satyam at 58 rupees, a 23 percent premium to Satyam’s last closing price.

(Click here to watch a Reuters Insight video)

Tech Mahindra, established more than 20 years ago as a joint venture between Mahindra & Mahindra and British Telecom, faces the daunting task of reshaping Satyam, a company at the heart of India's biggest corporate scandal.

Ever since Satyam's founder Ramalinga Raju shocked markets by disclosing the $1 billion-plus fraud, there have been numerous reports of Satyam's employees jumping ship and some clients cutting back on orders to Satyam.  The company's accounts are also still being restated and its U.S. liabilities are unclear.

Will the government continue to keep a close eye on Satyam? What's going to be the fate of Satyam's employees and clients? Will the Tech Mahindra-Satyam combination be able to grab market share from leaders Tata Consultancy, Infosys Technologies and Wipro? These are issues for which Tech Mahindra will need some answers pretty soon.

Another deal in healthcare: what’s the magic pill?

pillsAs dealmakers everywhere struggle to get deals done, the healthcare industry seals yet another one.

Express Scripts has agreed to buy health insurer WellPoint’s prescription business for $4.68 billion in a significant expansion for the U.S. pharmacy beenfit manager. The deal will be a concoction of cash and up to $1.4 billion in common stock, and will generate more than $1 billion of incremental EBITDA.

This comes on the heels of Pfizer’s $68 billion acquisition of Wyeth, Merck’s $41.1 billion takeover of Schering Plough and Roche Holding’s $46.8 billion buyout of Genentech. Granted, this isn’t a pharma deal, but it still falls under the umbrella of the healthcare sector.

from India Insight:

Fraud-hit Satyam pins hopes on shaky white knights

Three months after its founder Ramalinga Raju shocked markets by disclosing India’s biggest corporate scandal, Satyam Computer Services is desperately pinning its survival hopes on its auction set for April 13.

But only a handful of bidders are in the race due to lack of clarity over Satyam’s accounts and potential legal liabilities from U.S. lawsuits. Even if the company manages to find a buyer for a 51 percent stake, it’ll take a long time to instill confidence among employees already jumping shipand nervous clients.

What about the role of the government, whose appointed-board is due to choose the buyer the same week the country heads for national elections? Will the government remove its handpicked board or continue to keep a watchful eye on any new strategy chalked out by the new buyer?

Outsourcing bailout funds

SATYAM/Unsurprisingly, scandal-slammed Indian outsourcing firm Satyam says it may need some liquidity support to stay alive. Satyam founder and chairman Ramalinga Raju said he inflated his company’s reported cash and bank balances by more than 50 billion rupees ($1 billion). He seems to have taken to the Hyderabad hills — the company says it has no idea where he is. In a state known for its separatist tendencies, he may well stay disappeared for some time.

The interim CEO and company officers say they are committed to picking up the pieces. But this little “liquidity support” bombshell could prove to be a tricky one if it is directed at the biggest bail-out office currently handing out cash: the U.S. Treasury. Not being a U.S. company, Satyam probably doesn’t have the chutzpah to seek TARP funds directly. The company’s primary function as an outsourcing center would make the use of U.S. bailout funds politically repugnant to U.S. officials.

But the idea of foreign companies applying for U.S. taxpayer support is not a new one. Financial institutions the world over, saddled with dud U.S. mortgage-backed debt, have grumbled that they should get the same consideration as U.S. investors.

from India Insight:

It’s “all in the family” for Indian tech firm

Hold on to cash and don't jump in to help family-owned firms.

Satyam Computer Services got this stern message this week when it was forced to dump a plan to spend $1.6 billion to buy two builders, part-owned by Satyam's chairman and other insiders.

Ramalinga Raju, chairman, Satyam Computer Services is seen in his office in Hyderabad in this undated handout photograph. REUTERS/Handout

The move sent shockwaves across a country known for its trailblazing software industry, and triggered a cloud over corporate governance in India.