The deal

To acquire Patni, iGate will buy the entire 45.6 per cent shareholdings of the promoters — Patni brothers Narendra, Gajendra and Ashok, and 17.4 per cent held by private equity firm General Atlantic at a price of Rs 503.50 per share. The company will also make an open offer to other shareholders for acquiring a minimum of 20 per cent at the same price as per the Sebi rule. If the open offer is fully subscribed, iGate’s total stake in Patni will reach 83 per cent. 

To fund the total share purchase amount of $1.22 billion (Rs 5,560 crore) iGate has lined up a $700 million     (Rs 3,192 crore) debt from Royal Bank of Canada, iGate’s second largest IT client,  and Jefferies & Co, a global securities and investment banking group. 

It has also lined up a $270 million from Viscaria Ltd, a company backed by a private equity partner Apax Partners which will subscribe to iGate’s optionally convertible preferred stocks. These preference shares can be converted to common stocks (equity shares) at a conversion price of $20.30 per share. iGate is listed and traded on the Nasdaq exchange in USA and Patni is listed on Indian stock exchanges.  

The preferred stock investment by Viscaria may be increased by up to an additional $210 million if the need arises, Murthy said. If Apax’s holdings get converted into equity, it will hold between 20 and 30 per cent of iGate’s shares. 

Terms and financing of the transaction: iGATE expects to finance the purchase consideration of USD 1.22 billion through a combination of cash-in-hand, debt and equity financing, including a potential public offering of up to 10 million shares. Viscaria Limited, a company backed by funds advised by Apax Partners, will make an investment into iGATE in order to facilitate the acquisition of a majority stake in Patni. iGATE has agreed to sell to Viscaria Limited USD 270 million of preferred stock convertible into common stock with a conversion price of USD 20.30 per share. The preferred stock investment by Viscaria may be increased by up to an additional USD 210 million based on the subscription in the Open Offer process and in the event that the Company elects not to move forward with a public offering. Details of the preferred stock transaction will be included in a filing on Form 8-K, which iGATE expects to file shortly. In addition, iGATE has secured commitments for debt financing of up to USD 700 million in the aggregate from Jefferies & Company and RBC Capital Markets to fund the consideration.