iGate-Apax, Carlyle-Advent in final lap of Patni race

Deal likely to be over $1.1 bn, may be signed as early as next week.

The race for Patni Computer Systems has narrowed to two suitors — iGate-Apax Partners and the Carlyle-Advent International consortia.

Sources familiar with the developments said both groups had roped in bankers to manage open offers that would be a part of the promoters’ buyout and the deal may get signed as early as next week.

Nasdaq-listed iGate has tied up with technology, consumer and healthcare specialist Apax Partners, while Carlyle and Advent, two of the biggest private equity buyout funds, have joined hands for the deal.

The sources said the iGate-Apax combo had even roped in Kotak Mahindra Capital to work on the open offer document. JPMorgan or Citibank will be managing Carlyle-Advent’s open offer, along with its financing requirement.

An email sent to Kotak Mahindra Capital did not elicit any response, while sources in Citibank said it was still undecided.

NTT does not seem to be a serious bidder at this point, unless it gets back with a new proposal. “But between iGate-Apax and Carlyle-Advent, it’s still very close and there is no clear front-runner. It’s on the boil,” said another banker following the developments.

Patni is likely to be a leverage buyout. Which is why the potential suitors have also secured financing from banks to fund the acquisition, that is likely to cross a billion dollars. iGate-Apax have also managed to raise a credit line of over $600 million from Standard Chartered Bank, Duetsche Bank and Barclays. Other than the line of credit, iGate has also initiated a process to raise up to $392 million by selling 16 million shares. The Nasdaq-listed company has already applied to the US Securities and Exchange Commission for this.

The Patni brothers – Narendra, Ashok and Gajendra — and their families hold around 45.8 per cent stake. General Atlantic has slightly over 17 per cent in the company, through American depository receipts. All are expected to exit with this transaction, which will also trigger an open offer for an additional 20 per cent stake in the company.

Patni’s shares today closed 1.95 per cent higher at Rs 460.95 on the Bombay Stock Exchange. Sources said they expected the deal to close at Rs 520-530/share, which would take the total deal size to over $1.1 billion.

For iGate, this would be an important move, as it has set an ambition of becoming a $1-billion company. Meanwhile, it seems iGate’s investors in the US seem to have agreed to back the company’s plan to acquire Patni by steadily increasing the share prices since last week. Between November 7 and November 13, the company’s stock went up by 8.9 per cent.