Patni IGAte Deal
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Transcript of Patni IGAte Deal
GROUP MEMBERSA11003 Akshay Arolkar
A11014 Dhairya Parekh
A11050 Sachin Nikam
A11059 Shravani Khandray
A11068 Vishal Naik
DEAL DETAILSAcquirers Pan-Asia iGATE Solutions, Mauritius and iGATE Global Solutions Limited, India
Seller Promoter Group of Patni and General Atlantic Mauritius Limited (GA)
Acquisition From the promoter group:60,091,202 fully paid-up equity shares of face value Rs 2 each, representing 44.37% of the total issued and paid up equity share capital of Patni at a price of Rs 503.50 per Sale Share
From GA:i. 2,01,61,867 ADS, each ADS
representing 14.89% of the total issued and paid up equity share capital of Patni at a price of the dollar-equivalent (as of January 10, 2011) of Rs 503.50 per equity share underlying the ADS
ii. 27,52,081 equity share of Patni, representing 2.03% of the total issued and paid up equity share capital of Patni at a price of Rs 503.50 per equity share
From the public shareholders:2,70,85,565 equity shares of Patni, representing 20% of the total issued and paid up equity share capital of Patni at a price of Rs 503.50 per share
Total Consideration
Rs 5530.87 crore
Mode of Funding
Combination of balance sheet cash, debt and fresh equity issuance
BUSINESS MODEL
Our service offerings span the entire software services lifecycle including:• application development and integration, application• maintenance,• enterprise application systems• e-Business • enterprise systems management• research and• development services• business process outsourcing.
CLIENTS
Largest client, the GE Group
Second largest client, State Farm Insurance
The Guardian Life Insurance Company of America (“Guardian Life Insurance”),
Hitachi Group
HP
Pitney Bowes
Southern California
Edison
IGATE BUSINESS MODEL
The company focuses more on productivity, quality, and knowledge management.
Some of the services offered are :
Technology Consultancy
Application Development and Maintenance
Data Analytics
Independent Verification and Validation
Infrastructure Management Services
THE DEAL A WIN-WIN FOR PATNI AND iGATE
PATNI IS THE SIXTH LARGEST SOFTWARE IN INDIA
KEY PLAYER ACCROSS BANKING & FINANCIAL SERVICES,INSURENCE, MANUFACTURING, RETAIL, & MEDIA & ENTERTAINMENT
REVENUE OF THE COMBINED ENTITY RS. 42345 CR
HELP IGATE TO PITCH BIGGER AND LARGER BUSINESS DEALS
FINANCIAL CONSIDERATIONS
SOURCE OF FUNDING THE ACQUISITION • Internal Accruals :
Cash balance on balance sheet of iGate at the time of deal Rs. 450 Cr.
• Apax’s commitment to invest :- The deal was likely to be a leverage buyout.- Raise a credit line of over Rs. 2700 Cr from Standard Chartered Bank, Deutsche Bank and Barclays. - iGate raise up to Rs. 1764 Cr by selling Rs. 72 Cr shares at price of $20.30 to Viscaria Ltd- Sponsors had committed to Viscaria and iGate Corp that, it shall purchase equity and/or debt securities of Viscaria for an aggregate amount of up to Rs. 21600 Cr .
FINANCIAL CONSIDERATIONS
FUNDING THE DEAL
• Sponsors Investment in Viscaria :- purpose of enabling Viscaria to purchase the securities of iGate Corp.
• Sponsors had agreed to invest funds in iGate Corp, as follows:- Rs. 945 Cr of the Commitment to be invested in Viscaria at least two Business Days prior to the Escrow Deposit Date.
- Balance of the Commitment (up to Rs. 1215 Cr), to be invested in Viscaria, at least two Business Days prior to the date of completion of the Deal.
FINANCIAL CONSIDERATIONS
Acquisition of securities of iGate Corp by Viscaria :
• Viscaria had agreed to subscribe, in a private placement, to 270,000, 8.00% Series B convertible participating preferred shares for an aggregate purchase price of Rs. 1215 Cr.
This subscription was agreed to happen as follow – • Series B Preferred Stock worth Rs. 945 Cr on the date of first closing under the Viscaria Agreement two
Business Days prior to the Escrow Deposit Date .• Series B Preferred Stock worth Rs. 270 Cr on the date of first closing under the Viscaria Agreement two
Business Days prior to the date of completion of the transaction .
ADDITIONAL FINANCING
Viscaria Agreement – 2nd Closing
• Investments by Viscaria in Series B prefered socks • Rs.270 Cr. Upto Rs. 945 Cr.
Series B Preferred Stocks
• Conversion Option• Dividend Payment• Mandatory Conversion
Additional
DEBT COMMITMENT LETTER
Under Definitive Agreement – iGate corp.
• Revolving Credit Facility • Bridge Facility
Jefferies Finance LLC
Royal
Bank of Canada
COMMITMENT BANKS
• Borrower Obligations under the Revolving Credit Facility were unconditionally guaranteed
• Borrower Obligations and the Guarantees thereof were secured -after-acquired assets
• Revolving Credit Facility General Corporate Purposes• Notes or Bridge Facility
• Maturity 1. Rolling Credit Facility2. Notes3. Bridging Facility
Pay a portion of the cash
consideration for the acquisition
Pay related fees and expenses
NOTES PURCHASE AGREEMENTiGate Corp
iGate Technologies, Inc.
Jefferies &
Company, Inc.
and RBC Capital
Markets, LLC
Initial # iGate agreed to issue Purchasers & sell Initial Purchaser 9% Senior notes # iGate Techn, Inc. is guarantor – iGate corp. April 14, 2011
• April 29, 2011- Notes were issued to Initial Purchsers• Sold the Notes to Qualified Institutional buyers and Persons outside the US• Notes were used - Finance the Deal & Related Transactions
REVENUE MODEL
• It has set a target of getting 30% of the combined entity's revenues from an outcome-based model by 2017-CFO
• Time and material contract- Paid based on the cost of labour and material used Clients are usually billed on a per hour basis• Outcome based model- Paid based on the outcome of a
project• Rs 3900 Cr. Revenue by merged entity
61% PATNI 39% iGateRs. 2379 Cr. Rs 1521Cr.• Net profit Rs. 259 Cr. Rs. 256.5 Cr. as Rs 250 Cr
Interest
Was offer price of INR 503.50 justified under the Takeover Code 1997
Particulars INR
The average of the high and low of the closing prices for every week for the last 26-weeks prior to the date of the PA on NSE
467.94
The average of the daily high and low of the intra-day trading prices for the last 2-weeks prior to the date of the PA on NSE
471.28
The negotiated price 503.50
Can the Offer Price be revised after the public announcement is made?
Revision of Offer Price by the Acquirer
Automatic revision of the Offer Price
Will shares of Patni be delisted pursuant to the Open Offer?
Reducing the shareholding Delisting
Can ADS holders participate in the Open Offer?
What are the direct tax implications of Patni-iGate deal?
Non-compete fees
Are non-compete provisions enforceable in India?
RBI approval
THANK YOU