Patni board may discuss stake sale issue next week

Meeting likely on Monday.

Mumbai-based Patni Computer Systems is likely to call for a board meeting on Monday, January 3, to decide on the promoters stake sale to iGate, said sources in the know of the development.

IT services and solutions firm iGate along with private equity player Apax International had emerged as successful bidders to acquires over 60 per cent stake in the company. Apax International had bid in the range of Rs 525-530 per share.

Chief Executive Officer, Patni Computer Systems, Jeya Kumar did not reply to the query sent by Business Standard. Chief Executive Officer of iGate Phaneesh Murthy, too, declined to comment on the development.

With this promoters Narendra K Patni, Ashok Patni and Gajendra Patni, who hold 46 per cent stake, and PE player General Atlantic will exit from the company. General Atlantic holds 17 per cent stake.

If the Patni board accepts the iGate-Apax deal, the Nasdaq-listed firm, iGate, will have to make an open offer to acquire 20 per cent in the company.

The Patni stake sale buzz has been going on for several years, and till now, most of the deals fell apart due to valuation mismatch.

“Though this time the brothers are not creating too much of a problem, the non-compete fee the bidder has to give to the promoters might create some problem,” said another person close to the deal.

Patni is likely to be a leverage buyout for iGate. iGate-Apex have 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.

At present the company’s share price is trading at Rs 473 per share. This values the promoter stake of 45.8 per cent (6 crore shares) at around Rs 2,838 crore (around $630 million).

The company’s outstanding depository receipts (ADRs, GDRs and SDRs) as of September 30, 2010 were 28.9 million, which at the current price of $20.95 per receipts on the New York Stock Exchange, are worth $605 million (around Rs 2,700 crore).

If iGate is successful in pulling this over $1 billion transaction through, it will be one of the largest deal in the Indian IT services segment in the last one year.

Tech Mahindra’s acquisition of Hyderabad-based Satyam Computer Services (rebranded as Mahindra Satyam) is another example. The Mumbai-based IT firm acquired the 51 per cent stake in the company for Rs 2,889 crore (around $640 million).