Blackstone commits up to USD 2.8 bn to acquire controlling stake in Mphasis

New Delhi: Blackstone on Monday said funds managed by the private equity firm have entered into definitive agreements to acquire a majority stake in IT firm Mphasis Ltd, and the transaction will trigger an open offer for acquisition of up to 26 per cent stake.

A wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA), UC Investments (Office of the Chief Investment Officer of The Regents, University of California) and others will co-invest along with Blackstone, a statement said.

The sale is expected to complete in the coming months, subject to customary closing conditions and regulatory approvals.

Based on the open offer subscription, the blended purchase price will vary between Rs 1,452 to Rs 1,497 per share (12-16 per cent premium to 12-month average price and 3-6 per cent discount to 6-month average price) and the purchase consideration will vary between Rs 15,200 crore to Rs 21,000 crore (approximately USD 2-2.8 billion), the statement said.

Meanwhile, Mphasis in a regulatory filing said that “BCP Topco IX Pte Ltd along with Blackstone Capital Partners Asia NQ LP and Blackstone Capital Partners (CYM) VIII AIV – F LP… have announced an open offer for acquisition of up to 49,263,203 fully paid-up equity shares… from the public shareholders of Mphasis Ltd, representing 26 per cent of the Expanded Voting Share Capital, at a price of Rs 1,677.16 per equity share.”

This aggregates to a total consideration of Rs 8,262.23 crore, as per the filing.

The expanded voting share capital refers to the total voting equity share capital of the target company on a fully diluted basis expected as of the 10th working day from the closure of the tendering period for the open offer.

This includes 2,368,949 outstanding employee stock options already vested as on date, exercisable into equal number of equity shares, the filing said.

There will be an additional 59,500 employee stock options that will be vested between the date of the public announcement and August 31, 2021, it added.

A different fund managed by Blackstone had acquired a controlling stake in Mphasis from Hewlett Packard Enterprise in September 2016, it added.

At the end of March 2021 quarter, Marble II Pte Ltd, a fund managed by Blackstone, held 56.03 per cent stake in Mphasis.

Mphasis is exceptionally well-positioned given a terrific management team, strong order backlog, long-term strategic customer base, deep domain expertise in financial services, and a world-class suite of cloud and digital offerings, Amit Dixit, Co-Head of Asia Acquisitions and Head of India for Blackstone Private Equity, said.

“This investment enables us to continue creating value for the long term with continuity in the management team and the board, and provide additional resources to further accelerate the company’s growth momentum. We are grateful to Mphasis’ customers, investors, employees and board for their continued support,” he added.

Mphasis, which serves 35 of the top 50 US BFSI firms, is witnessing strong momentum on new business wins and has delivered its highest-ever quarterly Total Contract Value (TCV) wins in each of the last three quarters. Mphasis’ Direct TCV wins have increased 64 per cent year-on-year for the nine-month period ending December 31, 2020.

Nitin Rakesh, CEO and Executive Director of Mphasis, said Blackstone’s sustained strategic partnership will help the company accelerate its growth and scale new heights.

“Sovereign and pension funds co-investing is a testimony of long-term commitment and a vote of confidence of a marquee set of shareholders,” he added.