The unanimous approval of Satyam's erstwhile board to the Maytas deal was not unanimous in letter and spirit, the minutes of the infamous December 16 meeting revealed on Saturday.
While the board had 'unanimously' passed the resolution for the $1.6 billion acquisition of two Maytas firms, run by Satyam founder Ramalinga Raju's family, many of the five independent directors raised concerns over the deal.
The concerns related to the valuation, actual benefits to the shareholders being a related party transaction and assurance about board being used as a 'rubber stamp' and the company moving away from core business of IT.
Even after the passage of the resolution, the board members asked the company to make sure that compliance was ensured to their comments and proper justification was provided in case the actual value of the acquisition target turned out to be below what was told to them.
The minutes of the board meeting, held on December 16 and chaired by M Rammohan Rao, says that 'without prejudice to the unanimous approval by the board members of the above resolution (acquisition of Maytas Properties), board members further reiterated that compliance shall be ensured for the comments made by all the directors as deliberated and discussed during this meeting...
". . .particularly that proper justification be provided to the board members in the event the valuation of Maytas Properties is significantly higher than the aggregate of the actual value of completed projects, current market realisation value of the work-in-progress and the basic market value notified by the state government for registration of lands awaiting development."
The board had approved an investment of up to Rs 6,410 crore (Rs 64.1 billion) towards acquiring Maytas Properties through various instruments, 'as may be valued by the company in consultation with bankers, consultants and other intermediaries, pursuant to the applicable statutory and regulatory requirements.'
During the course of the meeting last month, Satyam's then chief financial officer Vadlamani Srinivas informed the board that the management considered this valuation as against Rs 6,523 crore (Rs 65.23 billion) evaluated by Ernst & Young.
But the global accounting firm has disputed doing the valuation for Maytas Properties -- of which it is, however, the statutory auditor.
According to the minutes, members noted the imperative of infrastructure foray, particularly based on leveraging on the brand of Satyam to become an eminent player in infrastructure as well.
Member Vinod Dham, however, noted that as transactions were between related parties it was important to demonstrate how it would benefit the shareholders.
Director Krishna Paelpu said that creating synergies between different entities was a challenge associated with the proposed acquisition and it needed to be managed well.
Mangalam Srinivasan, the first member to resign from the board of Satyam, had also made it clear thatthe Board should be involved from the beginning to avoid the impressionthat it (the board) is being used as a rubber-stamp to affirm the decision already taken.
To a query from another member T R Prasad, Maytas Properties CFO said that the company had mortgaged 110 acres with banks and financial institutions out of its 6,800 acres.
Rammohan Rao said that while the transaction would add value to Satyam, it needed to be ensured that valuation is up to date and done with different methods and consultants. He further advised that since it involved related parties, the deal and value should be communicated to all the stakeholders concerned.
Asked if shareholder was needed, Rao was told that it was not required in this case.
While advising the management to take the board's guidance for all its acquisitions, Mangalam Srinivasan said the deal was an 'encouraging goods news.'
Palepu, however, said that the proposed deal had two complicated aspects -- unrelated diversification and related party transactions.