PITTSBURGH, July 7, 2017 /PRNewswire/ --
Combined entity creates a stronger
Digital Transformation Services Company with deep Consulting and
Project Delivery Capabilities in Data Management &
Analytics
Transaction Highlights:
- InfoTrellis brings highly specialized capabilities in Data
Management & Analytics to Mastech Digital's suite of service
offerings
- Acquisition will significantly strengthen Mastech Digital's
capability to offer consulting and project-based delivery of
digital transformation services
- Combined entity has augmented scale, expanded global delivery
capability, and deeper leadership strength
- Total associate headcount to exceed 1,500 globally
Mastech Digital, Inc. (NYSE MKT: MHH), a leading digital
transformation services provider, today announced that it has
entered into definitive agreements to acquire the services division
of InfoTrellis Inc., a Canada-based Data Management & Analytics
company. The acquisition will bring together two differentiated
companies - both with global brand recognition and complementary
service offerings.
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The acquired business, to be branded as Mastech InfoTrellis, will
offer project-based consulting services to customers in the areas
of Master Data Management, Data Integration, and Big Data, and at
the same time strengthen Mastech Digital's digital transformation
services capability. InfoTrellis' industry-wide recognition for its
thought leadership and depth in data management & analytics, as
well as proven global delivery expertise, should enhance the growth
opportunities of the combined entity.
The transaction is valued at $55
million, with $35.7 million
paid in cash at closing and $19.3
million deferred over the next two years. The deferred
purchase price is contingent upon the acquired business generating
specified EBIT (Earnings Before Interest and Taxes) targets during
the two years following the closing and is payable in cash and in
installments following each year, if earned.
Mastech Digital expects to realize several synergies from the
combined enterprise:
- Ability to participate in larger digital transformation
deals
- Opportunity to cross-sell broader range of service offerings to
existing and future customers of both businesses
- Larger scale, improved operational efficiencies and expanded
global delivery model
- Better economies of scale from shared support services
integration
Commenting on the acquisition, Vivek
Gupta, President and CEO of Mastech Digital, said, "We began
transforming Mastech into a digital transformation services company
a year ago when we launched our new name 'Mastech Digital' and
recast our service offerings. The acquisition of InfoTrellis will
be a significant milestone in that journey. I am delighted with the
capabilities InfoTrellis brings to the Mastech Digital family and
am excited about creating a combined organization that will deliver
world-class services around Data Management & Analytics in its
expanded portfolio of digital transformation
services."
Mahmood Abbas, CEO and
Co-founder of InfoTrellis, said, "We are excited and looking
forward to uniting with Mastech Digital, which has global brand
recognition and is highly respected in the IT industry. I am
confident that our strengths in delivering project-based consulting
services in Data Management & Analytics, combined with Mastech
Digital's scale and proven experience in providing IT staffing and
digital transformation services, will create a powerful go-to brand
in the industry."
Also commenting on the deal, Sachin
Wadhwa, Chief Operating Officer and Co-founder of
InfoTrellis, said, "The integration will advance our vision of
addressing the wider challenges faced by our clients in adopting
Big Data and Advanced Analytics. We believe the combination of
Mastech Digital and InfoTrellis will have a meaningful impact in
the way Data Management and Analytics consulting is delivered by
us."
InfoTrellis has over 200 associates globally, a customer-base of
more than 40 blue chip customers in North
America, offices in Toronto
(Canada) and Austin (Texas, U.S.), as well as a global delivery
center in Chennai (India). Mastech Digital has nearly 1,300
associates globally, a customer-base of over 300 companies, seven
offices across the US, as well as a delivery center in New Delhi (India). Mastech Digital reported revenues of
$132 million for its latest fiscal
year ended December 31, 2016;
InfoTrellis reported revenues of $22
million for its latest fiscal year ended June 30, 2016.
The funding for the transaction will consist of a combination of
debt and equity. A new $65 million
facility with PNC Bank will provide debt financing for the
transaction, refinance Mastech Digital's existing debt with PNC and
provide borrowing capacity for the future. The equity financing
will be completed through a $6
million private placement of newly issued shares of Mastech
Digital common stock to Mastech's founders and majority
shareholders, Ashok Trivedi and
Sunil Wadhwani. The common
stock will be sold at price per share equal to the greater of
$7.00 or the closing price for the
common stock on July 10,
2017. The terms of the private placement were negotiated and
approved by a special committee of Independent Directors, which
retained counsel and an Independent Financial Advisor. Mr. Trivedi
and Mr. Wadhwani were also represented by independent counsel with
respect to the private placement. The closing of the private
placement is conditioned on the simultaneous closing of the
acquisition. The debt financing will also close concurrently with
the acquisition.
In connection with the acquisition, Messrs. Trivedi and Wadhwani
entered into an Equity Support Agreement with Mastech Digital
pursuant to which they agreed to future purchases of newly issued
Mastech Digital common stock at a price per share based on the
market price of the common stock at the time of any purchases
solely to the extent necessary to fund the deferred purchase price
payments described above in the event that Mastech Digital has
insufficient funds to make these payments.
The acquisition is subject to customary closing conditions and
is expected to close in July
2017.
Mastech Digital's M&A Advisors included: The Chesapeake
Group - financial advisors; Blank Rome, LLP - US legal counsel;
Blake, Cassels & Graydon, LLP - Canada legal counsel, and Khaitan & Co. -
Indian legal counsel. Messrs. Trivedi and Wadhwani were
advised by McGuireWoods LLP.
About Mastech Digital
Mastech Digital (NYSE MKT: MHH) is a national provider of IT
services focused on solving its customers' digital transformation
challenges. The Company's IT staffing services span across digital
and mainstream technologies while its digital transformation
services include Salesforce.com, SAP HANA, and digital learning
services. A minority-owned enterprise, Mastech Digital is
headquartered in Pittsburgh, PA
with offices across the U.S. and India. For more information, visit
http://www.mastechdigital.com .
About InfoTrellis
InfoTrellis is a Canada-based
information management consulting and technology services company
that provides project and consulting services in Master Data
Management, Data Integration, and Big Data.
Forward-Looking
Statements
Certain statements contained in this release are forward-looking
statements within the meaning of the 'safe harbor' provisions of
the United States Private Securities Litigation Reform Act of 1995.
Words such as 'expects', 'anticipates', 'plans', 'believes',
'estimates', 'plans' and 'projects' and variations of these words
and similar expressions are intended to identify forward-looking
statements, which include but are not limited to (i) projections of
revenues, earnings, and cash flow, and (ii) the expected completion
of the acquisition, debt financing and equity financing
transactions, the time frame in which such transactions will occur,
the expected benefits to Mastech Digital from completing such
transactions and the expected performance of Mastech Digital
following completion of the acquisition, debt financing and equity
financing transactions, including future financial and operating
results, expected synergies, and the combined company's plans,
objectives, expectations and intentions. These statements are based
on information currently available to Mastech Digital and it
assumes no obligation to update the forward-looking statements as
circumstances change. These statements are not guarantees of
future performance and involve certain risks and uncertainties,
which are difficult to predict and many of which are outside of the
control of Mastech Digital. Therefore, actual future results and
trends may differ materially from what is forecast in
forward-looking statements due to a variety of factors, including,
without limitation, (1) the occurrence of any event, change or
other circumstances that could give rise to the termination of the
definitive agreements for the acquisition, debt financing or equity
financing transactions; (2) the inability to timely complete or
complete at all the acquisition, debt financing or equity financing
transactions due to the failure to satisfy the conditions to
closing set forth in the definitive agreements for such
transactions; (3) the risk that the acquisition, debt financing or
equity financing transactions disrupt current plans and operations
of Mastech Digital and/or InfoTrellis as a result of the
announcement, pendency or consummation of such transactions; (4)
the ability to successfully integrate the operations and employees
of InfoTrellis into Mastech; (5) the ability to recognize the
anticipated benefits of the acquisition of InfoTrellis which may be
affected by, among other things, competition, the ability of
Mastech Digital to grow and manage growth profitably, maintain
relationships with customers and suppliers and retain key
employees; (6) costs related to the acquisition, debt financing and
equity financing transactions; (7) the possibility that Mastech
Digital or InfoTrellis or their respective subsidiaries and
affiliates may be adversely affected by other economic, business,
and/or competitive factors; and (8) other risks and uncertainties
that are described in more detail in Mastech Digital's filings with
the Securities and Exchange Commission, including its Form 10-K for
the year ended December 31, 2016.
Media Contact:
Donna Kijowski
+1-412-787-9551
donna.kijowski@mastechdigital.com
SOURCE Mastech Digital, Inc.