igate and patni deal

Parteek&Varun@ARC School Of Finance

PATNI &iGATE ACQUISITION



DEAL OVERVIEW

Acquirers Pan-Asia iGATE Solutions, Mauritius and iGATE Global Solutions Limited, India.

Seller Promoter Group of Patni& GA

Acquisition From the Promoter Group: 60,091,202 representing 44.37% of the total issued shares.

From GA: 2,01,61,867 ADS, representing 14.89% of the total issued shares&27,52,081 representing 2.03% share capital of Patni (“GA Shares”).

From the public shareholders of Patni 2,70,85,565 representing 20% of the share capital of Patni.

Acquisition Price INR 503.50 per share / ADS


Mode of acquisition i.Share Purchase Agreement dated January 10, 2011, between the Promoter Group, iGate and Pan-Asia to acquire the Sale Shares at a price of INR 503.50 per Sale Share

ii. Securities Purchase Agreement dated January 10, 2011, between Pan-Asia, iGate and GA to acquire the GA ADS at a price of the dollar-equivalent of INR 503.50 per equity share underlying the ADS

iii. Share Purchase Agreement dated January 10, 2011, between Pan-Asia, iGate and GA to acquire the GA Shares at a price of INR 503.50 per equity share .

iv. Mandatory open offer made to the public shareholders of Patni under the Takeover Code 1997.

Total Consideration USD 1.22 billion

Mode of Funding Combination of balance sheet cash, debt and fresh equity issuance

DEAL OVERVIEW


PARTIES INVOLVED

iGate Corp is the ultimate parent company of all iGate group companies.

It was incorporated on November 12, 1996 under the laws of the Commonwealth of Pennsylvania. Mr. Sunil Wadhwani and Mr. Ashok Trivedi are the founder shareholders of iGate Corp.

iGate Corp is an outsourcing provider of information technology (“IT”) and IT-enabled operations solutions & services and caters to different geographies through its subsidiaries.

iGate group has over 8,200 employees and 7 global delivery centers in Australia, India, Japan, and Mexico with offices in 16 countries and 4 continents.

The shares of iGate Corp are listed on Nasdaq stock exchange.


PARTIES INVOLVED

Patni was incorporated on February 10, 1978 under the Companies Act.

The shares of Patni got listed on BSE and NSE on February 25, 2004. As of January 7, 2011, the total paid-up equity share capital of Patni was INR 26,33,02,660 consisting of 13,16,51,330 equity shares of face value of INR 2 each.

There are no partly paid-up shares issued by Patni. Patni and its subsidiaries are engaged in IT consulting, software

development and Business Process Outsourcing ("BPO").

Patni has over 16,000 employees and 30 international offices across the Americas, Europe and Asia-Pacific and 22 global delivery centers across the world.

The equity shares of the company are listed on the BSE and the NSE.

The ADS of Patni are listed on the New York Stock Exchange ("NYSE")


COMPANY STRUCTURE


FUND RAISING BY iGATE

a. USD 50 million revolving credit facility (the “Revolving Credit Facility”); and b. either (a) up to USD 770 million in aggregate principal amount of senior notes or (b) if the Notes are not issued on or prior to the consummation of the transaction, up to USD 770 million of senior unsecured loans under a credit facility (the “Bridge Facility”).

c.Loan is financed by the Jefferies Finance LLC and Royal Bank of Canada

DEBT RAISED

EQUITY RAISED

330 Million dollar equity raised from PE firm APAX Partners

FROM BALANCESHEET

They have150 million cash in their Balance sheet.


COMERCIAL CONSIDERATION

What are the Reasons Behind iGATE Acquisition of Patni?

Patni had god customers & lot of cash in balance sheet

Patni had depth in verticals like healthcare,manufacturing,retail&product enginering services

No clash of business space

Patni had lot of real estate assets

Large workforce of 28000


Scaling up its geographic capabilities, particularly in EMEA and emerging markets

Concentrating the sales effort on three core verticals: financial services, insurance, health care which together contribute >50% of total revenue

Expanding the portfolio with higher value offerings in targeted micro-verticals: investing in building or acquiring software IP within each of these core verticals, also in increasing the number of personnel such as solution architects with industry domain expertise

Leveraging the iTOPS model / increasing outcome based pricing Winning larger deals.

STRATEGY AFTER ACQUISITION

iGate Patni is pursuing the following strategic initiatives


KEY FINANCIALS- IGATE

2008 2009 2010 2011

219 193 281

780

2008 2009 2010 2011

30 29

58

106

2008 2009 2010 2011

40 3661

143.8

2008 2009 2010 2011

29 29

5260Net Income

(In Million dol-lars)

Revenue(In Million Dollars)

EBIT(In Million Dollars)

EBITDA(In Million Dollars)


2008 2009 2010 2011

3117 3146 3188

3568

2008 2009 2010 2011

485605

694581

2008 2009 2010 2011

600748 812

717

2008 2009 2010 2011

438

586 623

418

Key Financials:PATNI

Revenue(In Crore)

EBIT(In Crore)

EBITDA(In Crore) Net Income(In Crore)


SHAREHOLDER PATTERN OF PATNI

45.72

2.451.270.74

13.38

2.1

3.360.18

2.090.04

0.12

28.46

0.0900000000000001

Promoters and Relatives of PromotersMutual Funds/UTIFinancial Institutions/BanksInsurance CompaniesForeign Institutional InvestorsBodies CorporateIndividualsNRIsForeign Corporate BodiesDirectorsTrusts and Clearing MembersShares underlying ADRs*Others


Multiples

%of ENTERPRISE VELUE

52w Diluted Revenues EBITDA EBIT

Company CMP High M.Cap EV LTM LTM LTM

patni 460.40 74% 6,240.75 4,687.00 1.47x 5.77x 6.75x

tech mahindra 731.00 63% 9,007.12 7,933.82 1.60x 7.41x 8.51x

ORACLE 2178 0.726 18274.885 18259.966 6.09x 13.79x 14.63x

High 6.09x 13.79x 14.63x

Mean 3.05x 8.99x 9.96x

Median 1.60x 7.41x 8.51x

low 1.47x 5.77x 6.75x


STOCK CHART

iGATEPATNI


PREVIOUS ACQUISITIONS BY PATNI & iGATE


HIGHLIGHTS OF PATNI & iGATE TOGETHER

Employee Base of 26,000 and a client base of 360. Two $100 million dollar clients, two $50 million dollar clients and 36 $5 million dollar clients.

Top five accounts contributing to 38% and top ten accounts contributing to 49% of revenues.

10 Delivery centers across India, Mexico and Australia, and over 50 offices in 20 countries.


Company Revenue for the year ended March 31, 20103

Tata Consultancy Services USD 7.11billion

Infosys USD 5.3 billion

Wipro USD 4.7 billion

HCL Technologies USD 2.8 billion

iGate – Patni Computers USD 0.941 billion

DREAM OF BILLION DOLLAR


THANKS

igate and patni deal

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