Shareholders revolt - IT Protests Of 2008

[VelMurugan]

Shareholders revolt

Satyam's move to acquire Maytas got stymied thanks to shareholder activism. The board of directors of the $2-billion plus company had approved to acquire a 100 per cent stake in property developer Maytas Properties and a 51 per cent share in railway and electricity infrastructure provider Maytas Infra for a combined value of $1.6 billion.

India's fourth largest IT outsourcer later cancelled plans to acquire the two non-IT companies after investment analysts questioned the company's motivation.

The revelation that the two companies (named after Satyam in reverse) are both closely associated with Satyam chairman B Ramalinga Raju and his associates set alarm bells ringing among investment analysts.

The deal -- which Raju said "will further de-risk our core IT business" -- would have also essentially transfer more than $1 billion of company cash into his private coffers and those of his affiliates.

The failed move to buy Maytas Infra cost Satyam promoters dearly. As per an analysis by ETIG, the Raju family (B Ramlinga Raju, chairman, Satyam Computers, Rama Raju Jr, promoter of Maytas Properties and B Teja Raju, vice-chairman, Maytas Infra) lost nearly Rs 597 crore in a day due to a fall in the stock value of Maytas and Satyam on the Bombay Stock Exchange (BSE). While the Rajus lost nearly Rs 397 crore of their shareholder wealth in Satyam, they lost another Rs 200 crore due to crash in the Maytas scrip.

Source : indiatimes