iGate-Apax acquires 63% stake in Patni
2011-01-10The much-awaited deal to acquire software services firm Patni Computer Systems has been completed, with the consortium of iGate Corporation and private equity major Apax Partners picking up a majority stake. The deal has been done at Rs 503.5 per share, valuing Patni at $1.45 billion (Rs 6,594 crore). The three Patni brothers, who together held a 45.6% stake, are selling their stake along with nearly a decade old investor General Atlantic. The iGate-Apax combine will pay $921 million for the 63% stake and the transaction is expected to be completed in the first half of 2011.
The deal will give iGate a delivery platform in India and allow the combined entity to bid for contracts along with the IT majors. With the acquisition of 63% stake from Patni founders and General Atlantic, the iGate-Apax combine is now expected to make an open offer for a 20.6% stake as per SEBi guidelines. The overall payout including the open offer for Patni will be $1.22 billion, where iGate-Apax combine could fork out up to $301 million in the open offer which also be made at Rs 503.5.
The deal involves Apax investing around $480 million in iGate, which will also raise debt to acquire Patni. It is the largest PE investment in the Indian IT/ITES space by a private equity firm after KKR's buyout of Aricent. Viscaria Limited, a company backed by Apax Partners, will invest $270 million through preferred stock in the first leg of the transaction. This preferred stock will be convertible into common stock with a conversion price of $20.30 per share.
Apax unit Viscaria could invest an additional $210 million based on the subscription in the Patni open offer and if iGate does not move forward with a public offering. Phaneesh Murthy-led iGate has already registered an offering of 10 million shares of its common stock and up to $100 million aggregate amount of debt securities in October, 2010.
The share price of iGate closed at $19.16 on the NASDAQ on Friday, down by 1.56%. The deal is set to be one of the largest M&A deal in the Indian IT/ITES space, with Patni brothers Ashok Kumar, Gajendra Kumar and Narendra Kumar and General Atlantic cashing out.
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