Blackstone to acquire controlling stake in Mphasis for up to $2.8 bn

Private equity player Blackstone will acquire a majority stake in Mphasis for $2.8 billion. A wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA), UC Investments and other long-term investors will co-invest along with Blackstone.

This transaction will trigger a mandatory open offer for the purchase of up to 26% additional shares of the company from the public shareholders and the acquiring entity has released a public announcement to the stock exchanges.

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 (or, approximately $2.0 billion to $2.8 billion). A different fund managed by Blackstone had acquired a controlling stake in Mphasis from Hewlett Packard Enterprise in September 2016.

“We are gratified to continue our partnership with Blackstone, both as a leading investor as well as our client. We believe 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,” said Nitin Rakesh, CEO and executive director of Mphasis.

Mphasis is a provider of IT services specialising in cloud and digital solutions. It has deep domain expertise in the banking, financial services and insurance sectors (BFSI) and serves 35 of the top 50 US BFSI firms. Mphasis 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: Direct TCV wins have increased 64 per cent YoY for the nine-month period ending December 31, 2020.

“Information technology and software services have been strong sectors for value creation for the last two decades. Mphasis is backed by strong secular tailwinds as global enterprises increasingly migrate to the cloud. The company 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. 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,” said Amit Dixit, co-head of Asia Acquisitions and head of India for Blackstone Private Equity.

“Blackstone has an exceptional team and franchise in India. An ownership mindset with a business building approach has led to many successful investments including its flagship investment in Mphasis. We have known the company and the management team for a few years and are delighted to now become investors. At UC Investments, we invest as partners with a long-term mindset in companies with secular tailwinds — Mphasis perfectly fits that bill,” said Satish Swamy, senior managing director Asia and Global Rates, UC Investments (The Regents of the University of California).

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

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