Virtusa to buy 53% in Polaris for Rs1,173 crore2 min read . Updated: 06 Nov 2015, 01:56 AM IST
As part of the deal, Virtusa will make an offer to Polaris's public shareholders for up to 26% more of its shares
US-based Virtusa Corp. will buy a 53% stake in Polaris Consulting and Services Ltd, a digital transformation and financial technology company, for ₹ 1,173 crore.
Virtusa will buy Polaris shares at approximately ₹ 220.73 each and make an offer to the company’s public shareholders for up to 26% more of its shares, Polaris said in a statement.
The promoter entities of Polaris led by Arun Jain and certain other shareholders, including OrbiTech Pvt. Ltd, will sell their shares.
Under a definitive share purchase agreement with Polaris, a subsidiary of Virtusa will make the acquisition.
“The acquisition of Polaris takes Virtusa even deeper into its core vertical BFSI (banking, financial services and insurance). By focusing vertically, it plays to the strength of a mid-tier supplier with a much broader value proposition, including consulting capabilities," said Tom Reuner, managing director for information technology outsourcing research at HfS Research.
Reuner believes that Citigroup, Polaris’s largest client which contributes around 35% to its revenue, would be a big advantage for Virtusa.
Polaris has been seen as a potential firm to fill up the financial portfolio of many IT companies.
In 2013, Business Standard had reported that Tech Mahindra may acquire Polaris to expand into banking, financial services and insurance.
The obvious risk is becoming overexposed to one business segment, Reuner said in an email.
“The upside is equally obvious as the segment is among the strongest spenders on IT with a modest risk of volatility," he said.
Ahead of the announcement, Polaris shares closed at ₹ 204.50, down 1.02% on BSE, while the exchange’s benchmark Sensex closed 0.94% lower at 26,304.20 points.
In September, The Times of India had reported that Virtusa was discussing a potential acquisition of Polaris Consulting in a deal valued at $350 million ( ₹ 2,310 crore).
Virtusa and Polaris will collectively have approximately 18,000 employees, generating $826 million of pro forma revenue for the 12 months ended 30 September 2015.
Virtusa and Polaris would together create a leading global provider of end-to-end IT services and solutions to the banking and financial services industry segment, said Virtusa chairman and chief executive officer Kris Canekeratne.
On a non-GAAP (generally accepted accounting principles) basis, the transaction is estimated to be ($0.08) dilutive to fiscal fourth-quarter 2016 earning per share, slightly dilutive to fiscal year 2017 earning per share, and accretive thereafter, said a press release from Virtusa.
The Polaris transaction is expected to close during Virtusa’s fourth fiscal-quarter ending 31 March 2016, Virtusa said.