Hyderabad, June 8: TRW Inc, a $17-billion US based company, and Satyam Computer Services Ltd announced that they have signed a letter of intent (LoI) to form a strategic alliance under which a newly formed joint venture will provide TRW and other global companies world-class information systems and engineering services. TRW is among the world's largest automotive and space technology products and services corporation. This venture will focus largely on the automotive sector worldwide where TRW is a leading player with customers and suppliers across the globe. Under the terms of the LoI, TRW will outsource to the joint venture at least $200 million of projects over a five-year period. The scope of outsourcing will include enterprise resource management, supply chain management, information systems, e-business applications, and engineering services.Managed and run by Satyam, the joint venture will have a paid-up capital of $1 million. Satyam will own a 76 per cent majority equity interest in the venture with TRW's equity interest at 24 per cent. Under the terms of the LoI, after December 31, 2003, TRW has the option to sell to Satyam its 24 per cent stake in the joint venture.
The option will be priced based on the volume of business provided to the joint venture by TRW. Satyam may buy out this stake with its equity securities at the then prevailing market price and/or the cash equivalent thereof, as the case may be, at Satyam's discretion. Pursuant to the LoI, TRW will continue to be obligated to provide the business to the joint venture even after it has divested its stake. Satyam will also issue $5 million worth of rupee convertible warrants to TRW which could be converted after eighteen months to Satyam stock as per SEBI guidelines.
Through the work executed for TRW, the joint venture will acquire core competencies and domain expertise in the auto sector. The joint venture can then leverage these competencies to acquire other customers in this sector. "We are extremely pleased to be teamed with Satyam, a company recognised for its engineering and information capabilities. Our strategic partner is well respected by many of the world's leading corporations, and we greatly value the technical capabilities of Satyam's people," said TRW president and chief operating officer David Cote.
"This strategic supplier relationship will be a great step in TRW's ongoing battle to reduce costs company-wide. I'm confident this will do much to help us achieve our competitive goals and better serve our customers by improving time-to-market for engineered services." Satyam chairman B Ramalinga Raju said, "This unique alliance with a world leader furthers Satyam's strategic goal to become a leading IT player for the global auto sector. Together with the existing engineering JV (with Venture Inc), this relationship offers an opportunity for Satyam to rapidly scale up domain expertise and size."
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