The Hindu Business Line : MphasiS: Reject

Shareholders of MphasiS can reject the open offer being made by TH Holdings along with Electronic Data Systems (EDS), as a person acting in concert, to acquire an additional 20 per cent equity stake in the company. Our recommendation is predicated on two elements.

One, the offer price of Rs 204.50 is significantly lower than the current market price.

Second, despite a relatively weak third quarter, the strategic direction and fundamentals of MphasiS rest on a sound footing. EDS, which has acquired a controlling stake in MphasiS through its open offer in April-May 2006, is expected to leverage the India headcount to catch up with its multinational peers — IBM and Accenture. It is also in the process of capitalising on cross-selling opportunities in the IT services and the BPO space.

MphasiS is working towards integrating the operations of EDS India with itself. The process is at an advanced stage and the stock swap ratio has been fixed at five shares of MphasiS for every four of EDS India. The merger process is pending before the High Courts.

Offer details: The current move is a follow-up to the open offer made by EDS in April-May 2006, with the intention of consolidating the shareholding in MphasiS. If successful, EDS will hold 70.10 per cent of equity. Citigroup Global Markets is the manager to the offer. The offer opened on January 29 and closes on February 19.

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