MUMBAI: The Nasdaq-listed iGate is set to acquire the country’s sixth largest software exporter, Patni Computer Systems in a $1-billion deal, at a price of around Rs 525 per share, after it reached an understanding with its promoters on the contentious issue of a non-compete provision, said two people with knowledge of the transaction.
The deal marks the culmination of several efforts made by the promoters and private equity firm General Atlantic to sell their stake in Patni Computer since 2007.
The non-compete clause, restricting the Patni brothers from starting a software business, will be applicable for less than two years, the people said.
“Barring the share purchase agreement, which is yet to be signed, and some minor terms and conditions, the deal is done,” said one of the people with direct knowledge of the deal. The Patni board is expected to meet next week as the two parties work out further details.
The transaction leading to iGate buying a controlling stake in Patni will be one of the largest acquisitions by an Indian software company, bigger than the Mahindra’s acquisition of Satyam Computer Services. “The promoters and iGate were able to arrive at a mutually acceptable solution on the non-compete,” the person said. iGate is owned by former Infosys marketing chief Phaneesh Murthy.
Ashok Patni, one of the three Patni brothers who own the company, and Murthy refused to comment when contacted. Murthy, who had said that he wants to grow iGate to a billion-dollar firm, had evaluated a bid for the scam-hit Satyam Computer Services but eventually decided not to bid because of the uncertainty around Satyam’s finances.
The Patni brothers, who hold 46% in the company, are selling their entire stake as is private equity firm General Atlantic, which holds 16%. The three brothers and GA are being advised by Credit Suisse, Ambit and Avendus in the deal. Patni shares ended flat on the BSE on Monday at Rs 486.40.
Shares of iGate were down marginally on Nasdaq in early trading. The Patni brothers hold approximately equal stakes will get around $250 million each. Earlier attempts to sell stake in Patni Computer failed because of disagreements between the brothers and the valuation expectations of the sellers were higher than what potential buyers were willing to pay.