iGate, Apax Close To Buying 63% Of Patni Computers

A consortium of private equity firms Apax Partners and iGate are close to buying 63 percent of Patni Computers in a deal valued at about $915 million, a source with direct knowledge of the matter told Reuters.

This likely acquisition of Patni Computers will catapult the combined entity into the Billion Dollar Revenue League. This augurs well for the combined entity as economies of large scale operation will result in the combined entity bidding successfully for larger IT Outsourcing Contracts whilst improving the margins for the company in the next 12-24 months.

The Apax-iGate consortium has offered about 500 rupees a share for the stake, the source said, adding that a deal would likely be announced early next week. The consortium, which beat a rival team of Carlyle, Advent International and Akansa Capital to the deal, will make an open offer for another 20 percent stake in Patni following the agreement, the source said. The iGate-Apax consortium is taking a loan of about $500 million to fund the deal, the source said.

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The founding Patni brothers are selling their 46 percent stake while private equity firm General Atlantic is selling its roughly 17 percent holding in the software services exporter, sources have previously told Reuters.

“Both companies will benefit from the likely deal. For iGate Corporation, with revenues for the combined entities of close to USD 1 Billion, it can represent to its customers its capabilities in executing larger outsourcing contracts. Similarly for Patni Computers, the deal will help the company to gain access to the large number of portfolio companies of Apax Partners, the Private Equity firm that is partnering with iGate Corporation in the acquisition of the Promoters stake in Patni Computers Limited,” said Ramchandra Naik, Practice Leader, Company and Market Intelligence, Datamonitor India.

“The combined entity is likely to have its share of integration related challenges especially with its customers and employees. Some of the customers of Patni Computers may not feel very comfortable doing business with the new management team. Similarly, some of the employees of the acquired company will feel out of place due to cultural issues especially when the acquiring company is a smaller entity. Therefore, the combined entity is likely to witness attrition at both – customer and employee level in the next 12 months,” said Sai Chandra Kanala, Senior Analyst Technology, Company and Market Intelligence, Datamonitor India.

With inputs from Reuters