Mumbai, Aug. 23: PE fund Baring Asia is acquiring a controlling stake in IT services provider Hexaware Technologies for around $420 million (Rs 2,745 crore).
The transaction will be a two-step process with Baring Private Equity Asia (Baring Asia) initially picking up a 27.7 per cent stake from promoter entities led by Atul Nishar and 14.1 per cent from General Atlantic, totalling 41.8 per cent.
The Asia-focussed PE entity will subsequently come out with an open offer to acquire an additional stake of 26 per cent in the company.
Interestingly, under the terms of the share purchase agreement, Baring Asia will pay the promoter entities and General Atlantic a price of Rs 126 or Rs 135 per share aggregating Rs 1,575–1,687 crore ($242-260 million).
Under the deal, Baring Asia will pay a higher price of Rs 135 per share if its shareholding reaches 50 per cent or more in the company.
Baring Asia will come out with an open offer for the minority shareholders of Hexaware to purchase up to an additional 26 per cent stake at a price of Rs 135 per share totalling Rs 1,058 crore ($160 million).
The open offer price of Rs 135 per share marks a premium of nearly 12 per cent over the closing price of the Hexaware scrip on the bourses today.
On the Bombay Stock Exchange, the news of the imminent transaction (the announcement was made after market hours) saw the share rising 1.60 per cent to Rs 120.75.
While Atul Nishar will continue as non-executive chairman of Hexaware, a statement from the company said P. R. Chandrasekar would remain its CEO.
This transaction is subject to customary conditions that include clearances from the Competition Commission of India and is expected to close by the end of this year.
Market circles said the open offer price of Rs 135 per share was largely in line with expectations.
News of acquisition of Hexaware has been doing the rounds over the past few months and apart from private equity entities, various companies in IT services were learnt to have expressed their interest.
The promoters, led by Nishar, now hold a 27.92 per cent stake and the sale will result in them being left with individual stakes of 0.22 per cent.
Analysts added that one of the main concerns that often arises among clients following such a deal is whether there will be continuity with regard to customer strategy.
“Hexaware will remain a public company, and the management team led by P.R. Chandrasekar will ensure continuity of relationships with all stakeholders, particularly our customers, employees and public shareholders,’’ Atul Nishar, chairman of Hexaware, said.
In the event of the open offer being fully subscribed, Barings Asia could take its stake in Hexaware up to 75 per cent.
In such an event, the total investment of over $465 million will be the largest made by Baring Asia in India; it will also be one of the largest ever foreign investments in the IT services sector in the country.
Hexaware has 8,700 employees, over 200 active customers, 8 global development centres, a presence in 35 countries worldwide and reported revenues of $364 million for the financial year ended December 31, 2012.
Meanwhile, in a BSE filing, Hexaware said its board of directors at a meeting held today “have been notified and have acknowledged that Elder Infosystem Pvt Ltd and Elder Venture LLP (both of whom were disclosed as “promoters”) and GA Global Investments Limited have entered into a share purchase agreements with HT Global IT Solutions Holdings Ltd (a Baring affiliate).”