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January 5, 2009

Satyam takeover mooted

At least five Indian IT companies are reportedly in the frame

By Jason Stamper

One of India’s largest software services company could be merged with another of the country’s top technology services companies, according to market speculation this morning.

Citing unnamed investment banking sources, various Indian media reports have linked Satyam Computer Services to any one of a number of its rivals, with HCL, Cognizant, MindTree, TCS and Tech Mahindra all named as potential suitors.

The reports are being fuelled by the recent decline in Satyam’s stock price after an aborted takeover bid, which has since led to a series of boardroom changes and the resignation of four independent directors amid allegations of poor corporate governance at the Hyderabad, India-based company.

Last week chairman and founder of Satyam, B Ramalinga Raju said that the business had engaged DSP Merrill Lynch to assist it in a review of strategic options that would help it understand how best to “enhance shareholder value”.

Today, officials at a number of companies cited as potential partners for Satyam denied any merger talks with most refusing to comment on market speculation, though Reuters reported that Bangalore-based MindTree was “not interested”.

HCL is seen as a front-runner for Satyam, which is sat on cash reserves in excess of $1 billion.

Satyam’s board is scheduled to meet on January 10 to consider its next steps.

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CBR Opinion
Satyam desperately needs to win back market confidence after the investor outcry that met a $1.6 billion plan to buy stakes in a pair of infrastructure businesses of sister company, Maytas and in which Satyam executives apparently had stakes.

A merger would likely trigger a reshuffle in the pecking order of top Indian software services companies, with the 50,000+ strong workforce of Satyam likely to propel the merged business entity into a top-three industry position.

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