Blackstone to acquire Mphasis in a Rs7,701 cr deal
04 April 2016
Blackstone India, the Indian arm of global private equity fund Blackstone Group LP, is acquiring Bengaluru-based information technology services provider Mphasis Ltd, in a deal worth up to Rs7,071 crore ($1.1 billion).
Blackstone India on Monday said it has entered into a definitive agreement with Hewlett Packard to buy its 60.5 per cent stake in Mphasis Limited. This will be followed by an open offer to public shareholders for the remaining stake in the company.
Based on the open offer subscription, the purchase price would vary between Rs5,466 crore and Rs7,071 crore ($825 million and $1.1 billion).
This would be the largest acquisition by Blackstone in India and the largest private equity transaction in the country.
HP currently owns 60.5 per cent of Mphasis. Blackstone will pay a purchase price of Rs430 per share to HP.
The transaction will trigger a mandatory open offer for purchase of an additional 26 per cent shares of the company as per the Sebi takeover code.
Blackstone's fund managers Marble II Pte Ltd, Marble I Pte Ltd and Blackstone Capital Partners have "made an open offer to the public equity shareholders of Mphasis Ltd to acquire up to 54,928,161 fully paid-up equity shares of face value of Rs10 each, representing 26 per cent of the total voting equity share capital... at a price of Rs457.54 per share," for a total price of about Rs2,513 crore, Mphasis informed the stock exchanges today.
Based on the open offer subscription, the purchase price consideration will vary between Rs5,466 crore and Rs7,071 crore ($825 million to $1.1 billion).
''We are impressed by Mphasis' strong domain expertise in banking, financial services and insurance vertical. Its deep relationship with marquee global customers has enabled it to deliver growth above the industry average in its direct international segment. We see large potential going forward driven by Mphasis' world-class delivery capabilities and its access to Blackstone's portfolio of companies across the globe. The company has an experienced management team who has a clear roadmap for company's growth,'' said Amit Dixit, senior managing director and co-head of private equity in India at Blackstone.
Hewlett Packard and Blackstone have agreed on the terms of a master services agreement, which Hewlett Packard proposes to sign with Mphasis, post approval by Mphasis' board of directors and shareholders.
The agreement will be for a duration of five years with three automatic renewals of two years each, fetching Mphasis revenues totaling $990 million over the next five years. Also, Mphasis will be included in HPE's preferred provider programme opening up significant additional revenue opportunities.
"Under the MSA, HP has proposed to commit a minimum revenue amount escalating year over year and totalling $990 million over the next five years. Also, Mphasis will be included in HP's preferred provider programme, opening up significant additional revenue opportunities," it said.
Buyout deals by private funds in the IT and software services sector in India saw a 40-per cent rise in 2015 to $2 billion, from $1.4 billion in 2014, according to data from VCCircle's research platform VCCedge.
Business processing outsourcing (BPO) services have seen deals worth $410 million in 2015.
In September, Blackstone Group had repurchased the India-based BPO operations of the UK's Serco Group Plc for £250 million, four years after selling the unit.
Besides its investment in Serco, Blackstone acquired a minority stake in Thiruvananthapuram-based technology firm IBS Software from private equity firm General Atlantic and other shareholders for $170 million in December.
In May, Blackstone had sold its controlling stake in cash management company CMS Info Systems Ltd to Baring Private Equity Asia in a deal worth $440 million.
Blackstone, which established its office in India in August 2005, has since then invested $3.5 billion in the country.