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iGate, Apax Secure Patni Deal For $1.2 Billion
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  • iGate, Apax Secure Patni Deal For $1.2 Billion

iGate, Apax Secure Patni Deal For $1.2 Billion

FP Archives • February 2, 2017, 22:54:12 IST
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Deal valued at $921 mn; iGate will buy an additional 20.6% stake through open offer to minority shareholders for $301 mn.

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iGate, Apax Secure Patni Deal For $1.2 Billion

iGate is buying a majority stake in Patni Computer Systems for $1.2 billion, helping it to take on bigger rivals in the country’s export-driven IT services industry. iGate, backed by private equity firm Apax Partners, said it agreed to pay 503.50 rupees a share for a 63 percent stake in Patni, valuing the deal at $921 million. It will buy an additional 20.6 percent stake through an open offer to Patni minority shareholders for $301 million.

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Small-and mid-cap IT services firms have been grappling with tepid demand and high attrition rates due to tough competition from larger rivals, and a rise in costs expenses in India’s $60 billion software services sector. Combining operations would allow mid-sized companies such as iGate and Patni take on bigger rivals such as Infosys Technologies Ltd and Wipro Ltd to compete for orders from overseas clients.

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The stake is being sold by Patni’s three founding brothers, who collectively own 45.6 percent, and private equity firm General Atlantic, which owns 17.4 percent. Talks to sell a stake in the software services exporter had been going on for about two years, but Patni never closed a deal due to valuation gaps with buyers, sources had told Reuters.

Phaneesh Murthy, iGate’s Chief Executive said the acquisition is likely to close in the first half of this year and it would help boost its revenue, customers and service offerings.

The iGate-Patni deal is the second-largest in then high technology sector in terms of deal value, after Oracle Corp’s acquisition of majority stake in India’s i-flex solutions for more than $1.5 billion, according to Thomson Reuters data.

Apax will bring in up to $480 million for the acquisition of Patni’s majority stake, and iGate will raise debt of up to $750 million from Jefferies & Company and RBC Capital Markets, Murthy told a news conference. Standard Chartered and Jefferies & Company advised the iGate-Apax consortium on the deal. Credit Suisse and Ambit Capital represented Patni and General Atlantic.

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Patni, also listed in New York, provides technology outsourcing services to industries such as insurance, telecoms, utilities and retail. Its clients include General Electric Co, Hitachi and Procter & Gamble Co’s Gillette. “We don’t see any overlap in clients, in fact we see synergy. The overall portfolio is extremely complementary. That is what we want to focus on,” Patni Chief Executive Jeya Kumar told reporters on a conference call. When asked if he wants to keep the two public listings following the deal, Murthy said it was unlikely. “All options are very much on the table. I think the fact (is) we would prefer to be listed primarily on the U.S. exchange.”

Patni has more than 16,000 staff, 282 clients and revenue of $689 million for the 12-month ended Sept 30, 2010. iGate, with 8,278 employees and 82 customers, had $252 million in revenue at the end of the 12-month period on Sept, 2010.

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