Following an investor outcry, Satyam Computer Services Ltd. late Tuesday dropped a $1.6 billion plan to buy stakes in a pair of infrastructure companies in which the Indian software company 's founders held stakes.
The decision came just half a day after Satyam said its board had approved the plan to buy 51% of Maytas Infra Ltd. and all of Mytas Properties Ltd.
The reversal was forced after Satyam's American depository receipts fell $6.85, or 55%, to $5.70 in 4 p.m. New York Stock Exchange composite trading. The ADRs rebounded 56% to $8.89 in after-hours trading.
Analysts criticized the proposed buyout because of the construction companies' lack of relevance to Satyam's core business, and because Satyam's founders, led by Chairman B. Ramalinga Raju, hold stakes of 36% in Maytas Infra and 35% in Maytas Properties. They also criticized the deal as overpriced.
“The shocking decision…will likely go down as one of the worst corporate governance events in India,” Bhavtosh Vajpayee and Nimish Joshi, analysts at Mumbai-based brokerage firm CLSA India, said in a note before Satyam abandoned the deal.
In a release announcing the about-face, Mr. Raju said the company still thinks the deal would have been good for Satyam but admits it misjudged the market's reaction. “In deference to the views expressed by many investors, we have decided to call off these acquisitions.”
Source: WSJ