After getting his ass whipped by irate investors over the proposed $1.6 billion acquisition of two building companies Maytas Properties and Maytas Infra with close links to the Raju family, Satyam Computer Services Chairman B.Ramalinga Raju has decided against going ahead with the deals.
The Raju family has significant stakes in the Maytas companies (Maytas is Satyam spelled backward) raising corporate governance concerns that triggered downgrades by Citigroup and JP Morgan Chase.
Raju tried to justify the acquisitions saying that it would ‘de-risk our core IT business by adding a new – yet well-established – business vertical in infrastructure’ but the investors refused to buy any of that.
On Wall Street, Satyam Computer’s ADRs fell nearly 55% to $5.70 Tuesday on the news of the proposed acquisition.
After the stinging rebuke from investors, Raju said on Tuesday:
We have been surprised by the market reaction to this decision even though we were quite positive about the merits of the acquisition. However, in deference to the views expressed by many investors, we have decided to call off these acquisitions.
Satyam was the biggest percentage price decliner on the New York Stock Exchange Tuesday, according to the Wall Street Journal.
And on Wednesday, Satyam Computer’s shares plunged nearly 31% in mid-day trading on the Indian bourses as well.
We think Raju has done irreparable damage to the image of Satyam Computer in the eyes of investors by his ill-considered actions.
In the current volatile economic climate, investors are extremely wary of anything that does not seem kosher.
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