iGate buys $1.2bn Patni stake

City A.M. Reporter
US-LISTED software firm iGate, backed by private equity firm Apax Partners, is buying a majority stake in India’s Patni Computer Systems for $1.2bn (£774m), marking one of the largest deals in India’s technology sector.

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 $60bn software services sector.

Combining operations would allow mid-sized companies such as iGate and Patni to increase scale and target bigger clients for outsourcing contracts in India’s export-driven IT services industry.

iGate said it agreed to pay 503.50 rupees a share for a 63 per cent stake in Patni, valuing the deal at $921m. It will buy an additional 20.6 per cent stake through an open offer to Patni minority shareholders for $301m.

The price of 503.50 rupees a share reflects a premium of 9.4 per cent over Patni’s closing price yesterday of near 464 rupees.

The stake is being sold by Patni’s three founding brothers, who collectively own 45.6 per cent, and private equity firm General Atlantic, which owns 17.4 per cent, iGate said.

iGate chief executive Phaneesh Murthy said the acquisition, which is expected to close in the first half of this year, would help boost its revenue, customers and service offerings.