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Follow UsTransaction Highlights:
- Combined headcount at 24,834 globally as on Sep 30, 2010
- Combined company will be a key player across several verticals
including Banking & Financial Services, Insurance, Manufacturing,
Retail, and Media & Entertainment - Increased access to global customers
- Increased scale, leadership strength and engineering bench
iGATE Corporation has announced that its subsidiaries have executed
definitive agreements to acquire a majority stake in
Computer Systems Limited. The transaction is valued at
approximately $1.22 billion, including the mandatory open offer to the
public shareholders of Patni. The transaction is expected to be
completed in the first half of 2011. iGATE expects the transaction to
be accretive by 2012 on a cash earnings per share basis.
The acquisition will bring together two highly recognized information
technology outsourcing companies with complementary industry verticals,
and facilitate sustained long-term growth for the combined entity. The
combination will create a compelling go-to-market strategy with iGATEs
differentiated iTOPS and outcomes-based business model augmented by
Patnis delivery expertise and focus on micro-verticals.
iGATE expects to realize multiple synergies from this combination:
- Opportunity to play in larger deals and more verticals
- Opportunity to cross-sell key solutions to a broader client base
- Opportunity to enhance win ratio based on selling combined
strengths - Efficiencies in operations and delivery services
- Economies of scale from consolidation of shared services
Commenting on the acquisition, Phaneesh Murthy, CEO of iGATE
Corporation, said, It has been our stated intent to scale revenues,
customers, and expand our vertical capability. We believe the threshold
of a billion dollar revenue will facilitate faster adoption of our
iTOPS for Business Outcomes model. We also believe that the combination
will help customers get better service, access to more service lines
and deeper pools of expertise.
He added, The objective is to synergize the leadership team of both
iGATE and Patni to create, over time, a world-class integrated
leadership team which will drive the combined company to newer
horizons.
iGATEs subsidiaries have signed definitive agreements with the three
founders of Patni Computer Systems, viz., Mr. Narendra Patni, Mr.
Gajendra Patni and Mr. Ashok Patni, and private equity firm General
Atlantic, to acquire their 45.6% and 17.4% stakes, respectively, at a
price of Rs.503.5 per share, amounting to a total consideration of
approximately $921 million.
In accordance with the requirements of the Securities and Exchange
Board of India (SEBI) and the applicable Indian rules on Takeovers
and Mergers, iGATEs subsidiaries will make an open offer to the public
shareholders to purchase an additional 20.6% stake in Patni. The
aggregate price for the shares to be purchased in the open offer
assuming full tender is estimated at $301 million.
The closing of the acquisition is subject to customary conditions,
including receipt of required regulatory approvals, and the completion
of the open offer for the purchase of shares of the public shareholders
of Patni. Patni Computer Systems has 16,556 employees, 282 customers,
22 global delivery centers, and offices in 30 locations worldwide, and
reported revenues of $689 million for the 12 months ended September 30,
2010. iGATE has 8,278 employees, 82 customers, seven global
delivery centers, and offices in 16 countries, with revenues of $252
million for the 12 months ended September 30, 2010.
An expanded pool of talent, diverse expertise across multiple
verticals, higher level strategic end-to-end service offerings and an
established management team with a track record of proven execution are
expected to strengthen iGATEs competitive position as a top-tier
player in the highly-fragmented global IT industry.
iGATEs iTOPS solution methodology is designed to overcome the
limitations of traditional outsourcing models. It addresses the problem
of conflicting business interests between traditional outsourcing
vendors and clients by allowing clients to use and pay for only the
outcome. For the service provider, it also creates a
discontinuity in the linearity of revenue with people
iGATEs advisors include: Jefferies & Company, Inc., financial
advisors, Kirkland & Ellis LLP, international legal counsel,
Khaitan & Co, Indian legal counsel, Kotak Mahindra Capital Company
Limited, Managers for the Open Offer, and Ernst and Young, tax advisors.
Terms and Financing of the
Transaction:
iGATE expects to finance the purchase consideration of $1.22 billion
through a combination of cash-in-hand, debt and equity financing,
including a potential public offering of up to 10 million shares.
Viscaria Limited, a company backed by funds advised by Apax Partners,
will make an investment into iGATE in order to facilitate the
acquisition of a majority stake in Patni. iGATE has agreed to sell to
Viscaria Limited $270 million of preferred stock convertible into
common stock with a conversion price of $20.30 per share. The
preferred stock investment by Viscaria may be increased by up to
an additional $210 million based on the subscription in the Open Offer
process and in the event that the Company elects not to move forward
with a public offering. Details of the preferred stock transaction will
be included in a filing on Form 8-K, which iGATE expects to file
shortly. In addition, iGATE has secured commitments for debt financing
of up to $700 million in the aggregate from Jefferies & Company,
Inc. and RBC Capital Markets to fund the consideration.