iGate, Apax To Buy Patni For $862 Million

US software firm iGate, backed by private equity firm Apax Partners, has agreed to acquire a majority stake in Patni Computer for $862 million, two sources with knowledge of the matter said, marking one of the largest deals in India’s technology sector. Gartner perceives the deal will add significant muscle to the combined entity and provide the necessary scale required for big ticket deals. “The combined Patni-iGate entity will be almost a billion dollar entity which is certainly a good size to have. In the IT service industry size and scale matters a lot to win large deals,” said Arup Roy, Sr. Research Analyst, Gartner.

iGate and Apax have agreed to pay 503.50 rupees a share for a 63 percent stake in Patni, the sources said, adding that the price does not include fees for a non-compete clause in the agreement. Apax will invest about $500 million in iGate for the acquisition. iGate will also take a loan of another $500 million from Standard Chartered and Deutsche Bank for the deal, the sources said. iGate has agreed to make an open offer for an additional 20-percent to Patni’s minority shareholders following the deal, the sources said.

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The parties have signed off on the deal, and an announcement is expected to be made later on Monday, the sources said. Patni’s three founding brothers are selling their 46 percent stake, while private equity firm General Atlantic is selling its 17 percent holding, the sources said. Patni, a mid-sized IT services company 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 brand.