Jan. 10: Software firm iGate is buying a majority stake in Patni Computer Systems for $1.2 billion, helping it to take on bigger rivals in the export-driven IT services industry.
US-listed iGate, backed by private equity firm Apax Partners, said it agreed to pay `503.50 a share for a 63 per cent stake in Patni, valuing the deal at $921 million. It will buy an additional 20.6 per cent stake through an open offer to Patni minority shareholders for $301 million.
Small and mid-cap IT services firms have been gr-appling with tepid demand and high attrition rates due to competition from larger rivals, and a rise in costs expenses in India's $60 billion IT services sector.
Combining operations would allow mid-sized companies such as iGate and Patni take on bigger rivals such as Infosys Technologies and Wipro Ltd to compete for orders from overseas clients.
“There is scope for consolidation in this sector and it will happen,” said Mr Rakesh Rawal, head of private wealth management at Anand Rathi Financial. The stake is being sold by Patni’s three founding brothers, who collectively own 45.6 per cent, and private equity firm General Atlantic, which owns 17.4 per cent. Talks to sell a stake in the software services exporter had been going on for about two years, but Patni never closed a deal due to valuation gaps with buyers, sources said.
This acquisition will propel iGate into a billion-dollar group of Indian IT companies as the combined entity will a revenue of about $941 million. The iGate-Patni deal is the second-largest in the IT sector in terms of deal value, after Oracle’s acquisition of majority stake in i-flex solutions for more than $1.5 billion.