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The Blackstone Group has rolled over its investments in Mphasis Ltd to a new fund after dropping its attempt to sell the Indian IT outsourcing service provider earlier this year.     

Funds owned by Abu Dhabi Investment Authority (ADIA), UC Investments (office of the chief investment officer of The Regents, University of California) and others will co-invest along with Blackstone to acquire as much as 75% stake in Mphasis, a press release issued by Blackstone said.

The purchase consideration will vary between Rs 15,200 crore to Rs 21,000 crore (about $2-2.8 billion), Blackstone said.

GIC is also co-investing alongside ADIA and UC Investments, a person with the knowledge of the deal told VCCircle.

Three Blackstone affiliate funds – Blackstone Capital Partners VIII, Blackstone Capital Partners Asia NQ LP and BCP Topco IX Pte Ltd – have signed an agreement to acquire 55.31% for Rs 15,216.9 crore (about $2 billion) from an older fund – Blackstone Capital Partners VI.  

This deal will automatically trigger a mandatory open offer, which will be managed by JM Financial Limited.  

Blackstone and affiliate funds will purchase up to an additional 26% stake in the company at Rs 1,677.16 apiece for aggregate cash payment of Rs 8,262.23 crore ($1.1 billion), the statement said.  

Blackstone and funds will acquire a maximum of 75% of the enlarged share capital of the company through the execution of the share purchase agreement and the open offer, the company said.  

“This investment enables us to continue creating value for the long term with continuity in the management team and the board, and provide additional resources to further accelerate the company’s growth momentum,” Amit Dixit, co-head of Asia acquisitions and head of India for Blackstone Private Equity, said.  

It was reported earlier in the year that Carlyle had made a sole bid to buy out Blackstone’s stake in the company, but the deal did not go through because of a valuation mismatch.  Blackstone had also wanted a more competitive process.    

“Information technology and software services have been strong sectors for value creation for the last two decades. Mphasis is backed by strong secular tailwinds as global enterprises increasingly migrate to the cloud. The company is exceptionally well-positioned given a terrific management team, strong order backlog, long-term strategic customer base, deep domain expertise in financial services, and a world-class suite of cloud and digital offerings,” Dixit added in a media statement on the rationale for this deal.  

Blackstone is an investor and a client of Mphasis, which provides cloud and digital services to companies predominantly in banking, financial services, insurance sectors.

The transaction is subject to receiving required regulatory and statutory approvals and the execution of the share purchase agreement subject to certain precedent conditions.  

“Blackstone has an exceptional team and franchise in India. An ownership mindset with a business-building approach has led to many successful investments including its flagship investment in Mphasis. We have known the company and the management team for a few years and are delighted to now become investors. At UC Investments, we invest as partners with a long-term mindset in companies with secular tailwinds -- Mphasis perfectly fits that bill,” Satish Swamy, senior managing director Asia and global rates, UC Investments (The Regents of the University of California), said.

The share price of the share purchase agreement has been set in a range of Rs 1,400-1,452 depending upon the public shareholder’s response to the open offer. The lesser the number of shares tendered in the open offer; the higher will be the consideration price payable for the shares.  

The selling shareholders will hold less than 10% stake in the company upon execution of the share purchase agreement.  

In April 2016, Blackstone Capital Partners acquired 60.48% stake in Mphasis from Hewlett Packard Enterprise for Rs 5,466 crore ($827 million).  

At the time, the deal triggered an open offer, but it eventually failed and the public shareholders of the Bengaluru-based IT services provider did not participate.

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