Patni-iGate deal hit by procedural delays

A stake sale deal between Patni Computer Systems and iGate is on course, but has been delayed due to procedural issues.Sources involved in the deal said they include tax-related developments and offshore transaction fees.

Nasdaq-listed iGate, which was in the last stages of finalising a deal with Patni, had called off its press briefing scheduled for Monday.

This gave rise to speculation that the deal has once again run into rough weather.

Sources also confirmed that there is no disagreement between the three Patni brothers and iGate on a non-compete fee.

"The deal has not been called off. iGate and Apax are still frontrunners in the stake sale. However, there are a few procedural issues that need to be sorted. They are nothing substantial. The deal should take a few weeks' time," said an official involved in the deal.

Calls made to Patni brothers Ashok and Gajendra did not elicit a response. One banker in the know said: "These last-minute procedural hurdles will cost iGate a few million dollars."

Meanwhile, the board of Patni today met for the first time to discuss the deal the promoters are evaluating.

"The board did meet and discuss the stake sale issue. But the discussion was very general. The board is yet to get a formal proposal. There are a few names that the stakeholders disclosed to the board," said a source.

"The intention seems to be to keep the board in the loop, since iGate was to make a press announcement. So far, board members have not said anything. Rather, the promoters told the board there are a few technical and legal wrinkles that need to be ironed out. That is between the stakeholders and potential buyer," said another source.

iGate with private equity firm Apax Partners have been in the fray to acquire over 60 per cent stake in India's seventh-largest IT services firm.

iGate, has bid to acquire the promoters' 46 per cent and PE player General Atlantic's 17 per cent holding for around Rs 520 a share.

If the deal does go through, it will be one of the largest in the IT space. iGate will be paying close to $1 billion.

Sources also confirmed that no new bidders have emerged. "So far, there is no new bidder. The deal is fairly large and issues like jurisdictional hurdles take time to be resolved," said a third source.

Patni's stock closed at Rs 469 a share, down 1.4 per cent on Monday. Shares were down by at least 2 per cent in intra-day trading.