Majesco shares rise over 20% after Thoma Bravo offers better deal to US arm

Shares of Majesco have shot up over 20 per cent this week after its US arm signed an amended agreement to sell Majesco US to private equity firm Thoma Bravo.

The revised price is $16 per share, up from the earlier offer of $13.1 per share, valuing the company at $729 million (Rs 5,467 crore). The revised offer from Thoma Bravo came after Majesco received an acquisition proposal from an unaffiliated third party.

This development has come as a bonus for domestic shareholders. Already, Majesco’s stock has skyrocketed from Rs 350 levels to Rs 630, following the earlier offer.

Shares of Majesco ended at Rs 786 on Thursday on the NSE, up 22 per cent over last week's close of Rs 646.

Analysts have been quick to revise the target price for the stock upwards.

 

 

“Majesco India holds 74.07 per cent stake in the US entity. Hence, based on the stake, the firm will now receive $513.8 million in cash (Rs 3,853.3 crore). Assuming a capital gains tax, the firm would receive Rs 3,121.2 crore in cash. This, coupled with Rs 23.5 crore in cash on the company's balance sheet, (would entail) that the total cash with the firm would be Rs 3,144.7 crore, or Rs 1,037 per share,” said ICICI Direct in a note.

The brokerage has, however, set a conservative price target of Rs 785 on the stock.

“The company plans to distribute this cash via buyback and/or dividend. Considering the uncertainty on the method of distribution, we conservatively revise our target price to Rs 785 per share, which is 22 per cent upside from current levels,” the note adds.

Majesco US' board of directors have unanimously approved the merger and recommended that shareholders approve the same. Majesco India's board also approved the revised deal on August 8. The transaction is expected to be completed by the end of 2020.

According to the initial agreement, Majesco US was to be sold to Thoma Bravo at $13.1 per share, valuing the company at $594 million, or Rs 4,455 crore. The offer price at the time was at a 77 per cent premium to Majesco US' closing price during the same period. Mastek, which holds around 6.5 per cent stake in Majesco US, has seen its share price rise by 66 per cent since July 20. Majesco provides cloud insurance software solutions for the insurance business.