Mumbai: Patni Computer Systems Ltd’s board has approved the delisting of shares from Indian bourses and American Depository Receipts (ADRs) from the New York Stock Exchange following the company’s acquisition by Nasdaq-listed iGate Corp. for $1.22 billion in May.
“The promoters believe that given the low liquidity in the company’s equity shares, the delisting proposal would provide the public investors of the company with ability to exit fully from the shares of the company,” Patni said in a statement on Wednesday.
Funding source: IGate CEO Phaneesh Murthy said the company may arrange a debt facility of approximately $215 million, which is expected to serve as the source of funds to pay for the acquisition. By Aniruddha Chowdhury/Mint
IGate holds 80.4% of Patni’s normal shares and ADRs through its subsidiaries—Pan-Asia iGate Solutions and iGate Global Solutions Ltd.
The acquirer’s promoters may offer to buy all the shares held by the public if the offer price determined in accordance with the Securities and Exchange Board of India’s regulations is acceptable to them, Patni said.
Patni’s shares closed 3.8% higher at Rs 388.65 on the Bombay Stock Exchange on Wednesday, outperforming the benchmark Sensex, which fell 0.6%.
IGate said in a separate statement that the floor price, or the minimum price it will offer for buying back the Patni shares, is Rs 356.74. That adds up to a buyback price of Rs 954 crore for the outstanding 19.6% equity.
The 19.6% includes more than 17.1 million shares held by public shareholders, about 7.01 million ADRs and almost 2.62 million outstanding employee stock options.
“Both iGate and Patni Computer would not have enough reserve cash stocks to fund the purchase of the delisting offer, and will have to resort to debt,” said an analyst who tracks Patni. He didn’t want to be named citing company policy that forbids interaction with the media.
“IGate’s ability to afford the price will be determined by a number of factors including the limitations on debt incurrence under its existing financing agreements,” Phaneesh Murthy, chief executive of iGate, said in the statement. “Based on such restrictions and other factors, iGate proposes to arrange a debt facility of approximately $215 million, which is expected to serve as the source of funds to pay for the acquisition.”
IGate will look at alternatives if it considers the ultimate discovered price too high, Murthy said.
Krupal Maniar, a technology analyst with ICICI Securities Ltd, said public shareholders who didn’t tender their shares in the open offer iGate initially made will expect a delisting price of at least Rs 503.50—the open offer price.
The delisting is expected by May 2012. The exit price for delisting is determined by a process called reverse bookbuilding.
Ashwin Ramarathinam contributed to the story.