Combined Enterprise With Close to USD 1 Billion in Revenues
Acquisition Creates a Differentiated Company With Scale in Many
Verticals
Transaction Highlights:
- Combined headcount at 24,834 globally as on Sep 30,
2010
- Combined company will be a key player across several
verticals including Banking & Financial Services, Insurance,
Manufacturing, Retail, and Media & Entertainment
- Increased access to global customers
- Increased scale, leadership strength and engineering
bench
iGATE Corporation (Nasdaq:IGTE), the first Business Outcomes based
integrated technology and operations company, today announced that
its subsidiaries have executed definitive agreements to acquire a
majority stake in Patni Computer Systems Ltd. (NSE:PATNI)
(NYSE:PTI), the Mumbai-based IT services and BPO company. The
transaction is valued at approximately $1.22 billion, including the
mandatory open offer to the public shareholders of Patni. The
transaction is expected to be completed in the first half of 2011.
iGATE expects the transaction to be accretive by 2012 on a cash
earnings per share basis.
The acquisition will bring together two highly recognized
information technology outsourcing companies with complementary
industry verticals, and facilitate sustained long-term growth for
the combined entity. The combination will create a compelling
go-to-market strategy with iGATE's differentiated iTOPS and
outcomes-based business model augmented by Patni's delivery
expertise and focus on micro-verticals.
iGATE expects to realize multiple synergies from this
combination:
- Opportunity to play in larger deals and more verticals -
Opportunity to cross-sell key solutions to a broader client base -
Opportunity to enhance win ratio based on selling combined
strengths - Efficiencies in operations and delivery services -
Economies of scale from consolidation of shared services
Commenting on the acquisition, Phaneesh Murthy, CEO of
iGATE Corporation, said, "It has been our stated intent to scale
revenues, customers, and expand our vertical capability. We believe
the threshold of a billion dollar revenue will facilitate faster
adoption of our iTOPS for Business Outcomes model. We also believe
that the combination will help customers get better service, access
to more service lines and deeper pools of expertise."
He added, "The objective is to synergize the leadership
team of both iGATE and Patni to create, over time, a world-class
integrated leadership team which will drive the combined company to
newer horizons."
iGATE's subsidiaries have signed definitive agreements with the
three founders of Patni Computer Systems, viz., Mr. Narendra Patni,
Mr. Gajendra Patni and Mr. Ashok Patni, and private equity firm
General Atlantic, to acquire their 45.6% and 17.4% stakes,
respectively, at a price of Rs.503.5 per share, amounting to a
total consideration of approximately $921 million.
In accordance with the requirements of the Securities and
Exchange Board of India ("SEBI") and the applicable Indian rules on
Takeovers and Mergers, iGATE's subsidiaries will make an open offer
to the public shareholders to purchase an additional 20.6% stake in
Patni. The aggregate price for the shares to be purchased in the
open offer assuming full tender is estimated at $301 million.
The closing of the acquisition is subject to customary
conditions, including receipt of required regulatory approvals, and
the completion of the open offer for the purchase of shares of the
public shareholders of Patni. Patni Computer Systems has 16,556
employees, 282 customers, 22 global delivery centers, and offices
in 30 locations worldwide, and reported revenues of $689 million
for the 12 months ended September 30, 2010. iGATE has 8,278
employees, 82 customers, seven global delivery centers, and offices
in 16 countries, with revenues of $252 million for the 12 months
ended September 30, 2010.
An expanded pool of talent, diverse expertise across multiple
verticals, higher level strategic end-to-end service offerings and
an established management team with a track record of proven
execution are expected to strengthen iGATE's competitive position
as a top-tier player in the highly-fragmented global IT
industry.
iGATE's iTOPS solution methodology is designed to overcome the
limitations of traditional outsourcing models. It addresses the
problem of conflicting business interests between traditional
outsourcing vendors and clients by allowing clients to use and pay
for only the outcome. For the service provider, it also creates a
discontinuity in the linearity of revenue with people
iGATE's advisors include: Jefferies & Company, Inc.,
financial advisors, Kirkland & Ellis LLP, international legal
counsel, Khaitan & Co, Indian legal counsel, Kotak Mahindra
Capital Company Limited, Managers for the Open Offer, and Ernst and
Young, tax advisors.
Terms and Financing of the Transaction:
iGATE expects to finance the purchase consideration of $1.22
billion through a combination of cash-in-hand, debt and equity
financing, including a potential public offering of up to 10
million shares.
Viscaria Limited, a company backed by funds advised by Apax
Partners, will make an investment into iGATE in order to facilitate
the acquisition of a majority stake in Patni. iGATE has agreed to
sell to Viscaria Limited $270 million of preferred stock
convertible into common stock with a conversion price of $20.30 per
share. The preferred stock investment by Viscaria may be increased
by up to an additional $210 million based on the subscription in
the Open Offer process and in the event that the Company elects not
to move forward with a public offering. Details of the preferred
stock transaction will be included in a filing on Form 8-K, which
iGATE expects to file shortly.
In addition, iGATE has secured commitments for debt financing of
up to $700 million in the aggregate from Jefferies & Company,
Inc. and RBC Capital Markets to fund the consideration.
Conference Call and Webcast Details:
iGATE will also host a conference call today to discuss the
acquisition at 8AM Eastern Time / 5AM Pacific Time. The live
discussion can be accessed by dialing 877-407-8037 in the U.S. and
201-689-8037 internationally, passcode 364827 and account number
293. The audio webcast of the call providing an overview of the
transaction and strategic rationale will be available at
www.iGATE.com for a period of one year from the date of
release. A replay of the call will be available via
webcast.
About iGATE:
iGATE is the first Business Outcomes driven integrated
Technology and Operations (iTOPS) solutions provider with a global
delivery model. iGATE's unique business model aligns with the
client's strategic objectives to achieve operational efficiencies,
increase cost variability and rationalize their current operating
environment. With industry expertise spanning decades, iGATE has
developed the right solutions with its Business Outcomes driven
approach for industry verticals - Banking, Insurance,
Manufacturing, Retail, Health Care, Media & Entertainment and
Telecom & Hi-Tech.
About Patni:
Patni is a global provider of IT services and business
solutions, servicing Global 2000 clients. Patni services its
clients through its micro-vertical focus in banking, financial
services (BFS) and insurance (I); manufacturing, retail and
distribution (MRD); life sciences; communications, media and
utilities (CMU).
Patni's service offerings include application development and
maintenance, enterprise software & systems integration
services, business and technology consulting, product engineering
services, infrastructure management services, customer interaction
services & business process outsourcing, quality assurance and
engineering services.
Safe Harbor:
Statements contained in this press release regarding the
benefits of the acquisition, the business outlook, the demand for
the products and services, and all other statements in this release
other than recitation of historical facts are forward-looking
statements. Words such as "expect", "potential", "believes",
"anticipates", "plans", "intends" and similar expressions are
intended to identify such forward-looking statements.
Forward-looking statements in the press release include, without
limitation, forecasts of market growth, future revenues, benefits
of the proposed acquisition, expectations that the acquisition will
be accretive to the results, future expectations concerning growth
of business, cost competitiveness and expansion of global reach
following the acquisition, and other matters that involve known and
unknown risks, uncertainties and other factors that may cause
results, levels of activity, performance or achievements to differ
materially from results expressed or implied by this press release.
Such risk factors include, among others: difficulties encountered
in integrating business; uncertainties as to the timing of the
acquisition, including the consummation of the public offer under
the Indian Takeover Regulations and the tender offer under US
securities laws; the satisfaction of the closing conditions to
the transaction, including the receipt of regulatory approvals;
whether certain market segments grow as anticipated; the
competitive environment in the information technology services
industry and competitive responses to the proposed acquisition; and
whether the companies can successfully provide services/products
and the degree to which these gain market
acceptance. Furthermore, in connection with the proposed
acquisition, the Company intends to borrow significant amounts,
including by issuing high yield notes, and will have to use a
significant portion of its cash flows to service such indebtedness,
as a result of which the Company might not have sufficient funds to
operate its businesses in the manner it intends or has operated in
the past; Additional risks relating to the Company are set forth in
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2009, as well as the Company's other reports filed
with the Securities and Exchange Commission. Actual results
may differ materially from those contained in the forward-looking
statements in this press release. Any forward-looking
statements are based on information currently available to the
company and it assumes no obligation to update these statements as
circumstances change. This document does not constitute an
offer to purchase or to sell securities in any jurisdiction.
CONTACT: Media Contact:
Prabhanjan Deshpande "PD"
+91 80 4104 5006
pr@igate.com
Prabhu S
+91 94440 40748
sprabhu@propr.in
Investor Contact:
Araceli Roiz
+1 510 896 3007
+91 97409 43004
araceli.roiz@igate.com
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