iGATE to delist Patni, will raise $215 mn to fund purchase

Nasdaq-listed iGATE Corporation on Wednesday announced its intention to commence the process of delisting its Indian subsidiary, Patni Computer Systems. Based in Fremont, California, with its Indian headquarter in Bangalore, the information technology solutions and services firm will raise $215 million (Rs 1,090 crore) via debt to fund the purchase.

The de-listing process, to be done through a reverse book building process, is expected to be completed by mid-2012. iGATE has indicated a floor price of Rs 356.74 per share. The delisting is subject to the approval of Patni shareholders and regulatory approvals.

Patni’s current stock price on the Bombay Stock Exchange is Rs 388.65 per share — up 3.7 per cent from the previous close.

iGate CEO Phaneesh Murthy said on Wednesday the company, based on such restrictions and other factors, has proposed to arrange a debt facility of approximately $215 million, which is expected to serve as the source of funds to pay for the acquisition.

“We believe that given the low liquidity of Patni’s equity shares, the delisting offer would provide the public investors of Patni with the ability to exit fully from the shares of Patni,” he said.

The 1996-founded company’s statement also said the price payable for the Patni shares would be determined pursuant to a Sebi-mandated reverse book building process. iGATE’s ability to afford the price would be determined by a number of factors including the limitations on debt incurrence under its existing financing agreements.

iGATE holds 80.4 per cent stake in the company. Accordingly, there is an aggregate of 17,105,993 equity shares, constituting 12.5 per cent of the fully diluted equity share capital of the company, which are held by the public shareholders. Additionally, as of date, there are 7,007,189 underlying American depository shares (ADSs) held by persons other than the promoters and 2,618,787 employee stock options.

Pointed out Murthy: “If, however, after the reverse book building process, we conclude the ultimate discovered price to purchase the Patni shares outweighs the benefits, we will examine our alternatives.”

The company also said the ADSs representing the ordinary shares of Patni could be delisted in accordance with applicable rules and regulations. iGATE has the right not to purchase the offered shares, if it did not find acceptable the final price discovered through the above process.