Nasdaq-listed iGate has completed its open offer to acquire 20 per cent stake in Indian IT services firm Patni Computer Systems, pushing its total equity holding to 83 per cent in a deal worth Rs 5,543 crore ($1.24 billion). The transaction, which was backed by buyout giant Apax Partners, involved exit of promoters Patni brothers, along with nearly decade-old private equity investor General Atlantic, in one of the largest M&A deal in the Indian IT/ITES space.
The open offer triggered by the takeover norms of a listed company in India closed on April 27 with minority shareholders fully accepting the offer that was at a premium to the market price. iGate shelled out Rs 1,363.75 crore or $ 305 million.
iGate’s deal with promoters and the private equity investor amounts to Rs 4,179 crore or $935 million (based on current exchange rate).
The open offer was at Rs 503.5, compared to current market price of Patni Computers at Rs 387 per share.
The firm had earlier said that Apax would invest up to $480 million in iGate through its entity Viscaria Ltd. Viscaria 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. It can also 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.
iGate had said last month that it had priced an offering of $770 million aggregate principal amount of 9 per cent senior notes due 2016, to finance the Patni deal.
The deal will give iGate a delivery platform in India and allow the combined entity to bid for contracts along with the IT majors.
Delisting On Cards?
The next question is how soon iGate will go ahead to delist Patni Computer? As of now, iGate has around 83 per cent stake, as against the 75 per cent limit for non-public shareholding of an Indian listed firm.
This means iGate either needs to shower enough share options to employees, issue fresh shares of the company to outside investors or sell its own equity to see through a dilution of its stake in Patni. The only other option, if that is the plan, is to come out with another voluntary offer to delist the firm.
iGate CEO Phaneesh Murthy said earlier that no formal decision had been taken on this yet. “But over the long term, one listed company is better for all stakeholders. We would prefer to be listed on the US exchange.”
According to media reports, market regulator SEBI has restricted iGate not to delist Patni soon after the open offer. So the delisting may not be happening in the next few weeks, but it may yet be coming soon enough.