Blackstone’s open offer for Mphasis fails; ends with 60% stake

Private equity firm Blackstone did not manage to buy any significant number of shares in the open offer for Bengaluru-based IT services firm Mphasis Ltd.

The buyout major, which had struck a deal in April to buy a majority stake in Mphasis from Hewlett Packard Enterprise (HPE), has closed the transaction with a 60.17% stake for Rs 5,466 crore ($816 million).

The deal, Blackstone's largest in India, had a clause where the PE giant was to first buy at least a 50.27% stake in Mphasis from HPE for Rs 4,566.2 crore. The proposed buyout had set off a mandatory offer for the purchase of an additional 26% stake from public shareholders, which could have pushed up the overall deal size to as much as Rs 7,071 crore ($1.1 billion, when announced).

Depending on the success of the open offer, Blackstone was to buy HPE's remaining 9.9% stake. 

In the open offer that concluded last month, Blackstone managed to buy just 2,178 shares as against 54.9 million shares it had offered to acquire. It has now bought HPE's remaining stake.

VCCircle had earlier indicated that since the offer price was not at any significant premium to the market price, it may not find many takers.

Blackstone had made the open offer at Rs 457.54 a share. Mphasis shares have been trading at a higher level ever since the deal was announced.

The shares ended at Rs 563.05 apiece, down 0.73% on the BSE in a flat Mumbai market on Thursday.

JM Financial managed the open offer for Mphasis on behalf of Blackstone.

A control private equity deal is a rarity in India, where most PE transactions are for growth equity and involve minority stake purchases. This deal came bundled with a master service agreement that requires HPE to commit a minimum revenue amount escalating year over year and totalling $990 million over the next five years.

Mphasis will also be included in HPE’s preferred provider programme, opening up significant additional revenue opportunities, the company had said previously.

Mphasis, which posted revenue of Rs 5,999.6 crore and a net profit of Rs 692.3 crore for the 12 months to 31 December 2015, counts among its customers the six top global banks, 11 of 15 top mortgage lenders and top three insurance companies. The company has around 24,000 employees across 16 countries.

Last September, Blackstone had bought the UK-based Serco’s India business process outsourcing operations for $385 million in a deal that helped it emerge as a major force in the $26 billion Indian BPO industry. The world's top PE firm had previously also invested in IT company CMS Info Systems and last year sold it to Baring Private Equity Asia.

Like this report? Sign up for our daily newsletter to get our top reports.

Leave Your Comment(s)