iGate will make an open offer to Patni shareholders according to the norms of the Securities and Exchange Board of India (SEBI), the capital market regulator. The board of Patni Computer Systems will meet on Monday to approve the transaction as well as the open offer, the people said.
iGate CEO Phaneesh Murthy is currently in India to close the deal. An iGate-Patni combination will create an information technology company with over a billion dollars in revenue and presence across multiple geographies. The deal is likely to be executed at a price of around Rs. 500 per share.
iGate is backed by London-headquartered buyout fund Apax Partners LLP which makes investments across sectors including technology and telecom. Apax Partners will invest in an iGate holding company which may later be used as an intermediate vehicle to facilitate a merger between iGate and Patni, according to people familiar with the structure of the deal.
Both Patni Computers and iGate Corporation refused to confirm that a board meeting is scheduled for Monday next week. A spokesperson for Apax Partners refused to comment on the story.
The race to acquire control of Patni Computer Systems resulted in a closely fought bidding war. According to reports, Japanese players Fujitsu and NTT Docomo and a consortium of two private equity funds Carlyle and Advent International were also in the race to pick up a controlling stake in this mid-tier company.
ET NOW, this paper’s business channel, first reported on 25 December that Carlyle had walked out of the bidding process after Advent withdrew from the consortium. Although the company has been on the block for several years, this is the first time that a deal is just days away.
Some industry analysts say that the change in ownership could lead to attrition and exit of some clients. According to Offshore Insights research founder, Sudin Apte, “Most clients feel that a substantially smaller provider like iGate buying India’s seventh largest IT services company will result not only in a long stretched acquisition and integration process as both firms are listed, but may face several issues such as higher staff attrition, losing several management members, and even changes in strategy.“
Others say such fears are exaggerated, partly because of Apax Partners’ portfolio of clients. “Apax Partners is a leading PE player globally and the merged entity could now have access to clients of other technology companies that are a part of their investment portfolio,” said Ramchandra Naik, Practice Leader, Datamonitor.
Patni Computer Systems is promoted by three brothers, Narendra Patni, Gajendra Patni and Ashok Patni who collectively own close to 46% in the company while private equity fund General Atlantic owns 16%.
Source: Economic Times