Software services company Mahindra Satyam agreed to merge with its parent Tech Mahindra Ltd , the two companies said in separate statements on Wednesday.
The swap ratio has been set at 8:5 to 1 or 17:2. The swap ratio is the ratio in which an acquiring company will offer its own shares in exchange for the target company’s shares during a merger or acquisition. Shareholders will get one share of Tech Mahindra for 8.5 shares of Mahindra Satyam, the companies said.
The ratio is on expected lines, though some players felt Tech Mahindra shareholders should have got a slightly better deal because of the liabilities in Mahindra Satyam. The merger will create the fifth largest player in the listed I-T services space, with combined revenues of a little over Rs 10,000 crore.
Satyam was sold in April 2009 to Tech Mahindra, a unit of Mahindra & Mahindra , after the founder of the Hyderabad-based company admitted to one of the largest accounting frauds in India.
Shares of Tech Mahindra surged after the announcement was made. At 0940 hours, Tech Mahindra stocks rose over 4.5 percent on the BSE at Rs 679. Shares of Mahindra Satyam traded 2 percent higher at Rs 75.65.