Tech Mahindra, a joint venture of the auto giant Mahindra & Mahindra (M&M) and British Telecom, on Monday emerged as the top bidder for Satyam Computers with an offer of Rs 58 per share for a 31 per cent equity stake in the fraud-hit company, beating two other strong rivals Larsen & Toubro (L&T) and Cognizant-Wilbur Ross combine.

After evaluating the bids, the Satyam board on Monday morning announced that its directors have "selected Venturbay Consultants Private Limited, a subsidiary controlled by Tech Mahindra Limited, as the highest bidder to acquire a controlling stake in the company, subject to the approval of the company law board (CLB)."

Engineering firm L&T's bid was at Rs 45.90 per share, while the Cognizant-Wilbur Ross combine had put in their bid at Rs 20 per share, Kiran Karnik, Satyam board chairman told reporters.

In effect, Tech Mahindra will have to pay Rs 1,757 crore to buy 31 per cent stake in Satyam. The enterprise value of the company thus stands at Rs 5,667 crore on its expanded equity.

Tech Mahindra's total acquisition cost will be Rs 2,890 crore for 51 per cent stake after the 20 per cent mandatory open offer for Satyam shares. If the company fails to get 20 per cent from the open offer, it will be allowed to make good for the shortfall with fresh equity capital.

Conflict of interests

Deepak Parekh and S B Mainak stayed off from the selection process due to possible conflict of interests as Parekh sits on the board of M&M, while Mainak is the executive director of a significant shareholder of another bidder.

In the open offer, after CLB's approval, all shareholders, including American depository share (ADS) holders, will be able to take part.

Earlier in the day, Tech Mahindra and Satyam Computers executed the share subscription agreement with the company envisaging to acquire 30,27,64,327 shares of Satyam.

Karnik said the stand-still agreement with the bidders prevented them from buying or selling Satyam's shares for the next six months.

So L&T, which is a huge shareholder in the company, cannot sell its stake for the next six months, being privy to the key information during the bidding process.

Commenting on Tech Mahindra's successful bid for Satyam, S Gopalakrishnan, CEO, Infosys Technologies, said: "It is commendable that the government-appointed board at Satyam has been able to bring a closure to the uncertainty surrounding Satyam's future.

The government has addressed the issue quickly and responsibly. Overall, it is a good thing that the issue is put behind us."