iGate seals Patni deal for $1.22 billion

US-based iGate on Monday said it has acquired nearly 63 per cent stake in country's sixth largest IT firm Patni Computer Systems for $1. 22 billion.

iGate will buy 45.6 per cent of the shares of the three founders of Patni -- Narendra Patni, Gajendra Patni and Ashok Patni-- along with the 17.4 per cent stake of private equity firm General Atlantic, iGate CEO Phaneesh Murthy said.

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The transaction is valued at approximately $1.22 billion, including the mandatory 20 per cent open offer to be made to the public shareholders of Patni, he added.

The deal is expected to be completed in the first half of 2011, after acquiring all the regulatory approvals.

Shares of Patni Computer were trading at about Rs 466.80, up 1.46 per cent on the Bombay Stock Exchange.

iGate will pay about $921 million for buying the 63 per cent share at Rs 503.50 a piece. iGate will issue equity to Apax Partners for $270-480 million, depending on the response to the open offer.

The US-based company will also raise debt of about $700 million from Jefferies & Company and RBC Capital Markets to fund the acquisition.

iGATE has also agreed to sell to Apax Partners $270 million worth of equity (preferred stock convertible into common stock), which may be later increased upto $480 million based on the response to open offer.

"We also believe that the combination will help customers get better service, access to more service lines and deeper pools of expertise," Murthy said.

The transaction is expected to be accretive by 2012 on a cash earnings per share basis, he added. In accordance with the requirements of the Securities and Exchange Board of India (SEBI), iGate subsidiaries will make an open offer to the public shareholders to purchase an additional 20.6 per cent stake in Patni.

The aggregate price for the shares to be purchased in the open offer assuming full tender is estimated at $301 million. With the completion of the deal, the combined headcount of both the entities will stand at 24,834 globally as on Sep 30, 2010.

Chronology

Early 2007: Patni in discussion for stake sale to Apax Partners and the Texas Pacific Group (TPG).

Oct 2007: Stake sale called off due to management issues and pricing mismatch. 2009: General Atlantic looks at selling stake, which again falls apart on pricing concerns.

Oct 2010: Patni starts fresh round of discussions; iGate-Apax and Caryle-Advent consortiums in fray.

Dec 2010: iGate-Apax tipped to be the frontrunner. Jan 2, 2011: Deal announcement with iGate delayed over tax issues.

Jan 10, 2011: iGate-Apax buys 63 per cent stake in Patni.