Financial Daily from THE HINDU group of publications
Friday, Jun 09, 2006
Financial Daily from THE HINDU group of publications Friday, Jun 09, 2006 |
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Outsourcing Info-Tech - Mergers & Acquisitions EDS buys out MphasiS Our Bureau
`AGGRESSIVE ACQUISITION': Mr Stephen R. Heidt (left), Vice-President, EDS , and Mr Jerry Rao, Chairman and CEO, MphasiS, at a press conference in Bangalore on Thursday. - G. R. N. Somashekar
Bangalore June 8 Electronic Data Systems Corporation (EDS) has successfully acquired a 52 per cent stake in IT services and BPO firm MphasiS BFL Ltd in a $380-million (about Rs 1,750 crore) cash deal. EDS got more than the 83 million shares it required in response to a conditional open offer at Rs 204.5 per share to acquire a majority stake in Mphasis. The conditional offer that opened on May 17 closed on June 5. Announcing the successful buyout, Mr Steve Heidt, Vice-President, EDS, said, "The acquisition was not defensive, but aggressive. Mphasis brings us unique set of skills that are complementary to EDS." MphasiS will continue to operate with its current management team and name. EDS is evaluating options to merge its 3,000-employee Indian unit with the 11,000-strong Mphasis, Mr Heidt said. The combined entity in India will have more than 20,000 employees by this year-end, making it the largest workforce outside the US for EDS. "We may maintain the integrated entity as a listed subsidiary. For now, our prime focus is to complete the transaction by June, integrate both the entities successfully and leverage on each others capabilities," Mr Heidt said in reply to a query whether EDS would go for de-listing of Mphasis. Mr Saurabh Shah, Director - Investment Banking, Citibank India, which advised EDS on the deal, said the additional shares received would be returned to shareholders on proportionate basis after retaining the required 83 million shares. The counting of shares will be completed by June 20.
Deal to leverage EDS' scale
"The deal is about leveraging EDS' scale and the sheer size EDS brings to the table," said Mr Jaithirth Rao, Chairman and Chief Executive, Mphasis. "The deal ensures the Mphasis employees obtain great opportunity by now being part of the company that invented IT outsourcing," said Mr Rao, who will continue as the chief executive of Mphasis. Analysts said the attractive offer price in the current market conditions triggered a better response to the EDS open offer. The EDS offer price was at a premium of 9 per cent to the closing price of Rs 188 on June 5, the concluding day of the open offer. The offer price was 37 per cent higher than the closing price of Mphasis shares on Monday, which slumped 10 per cent to Rs 149 on the Bombay Stock Exchange. Mphasis reported a revenue of Rs 940 crore in the year ended March 31, 2006, and net profit of Rs 149 crore. Last week, Baring India Investment Ltd offered to sell its entire 34.73 per cent stake in Mphasis. Mr Rao has offered to sell 18.75 lakh shares in the open offer.
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