Patni auction nears close

A winner for the Indian asset is likely to be determined this week, putting to rest a bidding war which has involved private equity firms Apax Partners, The Carlyle Group and Advent International.

The bidding war for a privately held 62 percent stake in Bombay and New York-listed Patni Computer Systems is likely to conclude soon, with final bids submitted Tuesday. 

Media reports in the run-up to the deadline put a partnership between Apax Partners and trade buyer iGate as a likely front-runner over a rival consortium consisting of private equity players The Carlyle Group and Advent International. The winner is expected to be announced at the end of this week.

The stake for sale is made up of a 16 percent stake held by US-based private equity firm General Atlantic and a 46 percent stake held by the company’s founders, according to various media reports.

A report in India’s Economic Times estimated the deal would fetch in the region of INR 40 billion (€672.7 million; $884.5 million), which prices the bids at between INR 500 to INR 550 per share. Patni shares were trading on the BSE at INR 485.75 at the time of writing. The Times also added that following the bids, there would be an open offer for a minimum 20 percent stake.

According to the report, the winning bidder is highly dependent on the preferences of American conglomerate General Electric (GE), one of Patni’s largest clients. Citing an anonymous source, the Times said Carlyle had opened dialogue with the multinational in order to “press its case”.

The Times had also noted in prior reports that the bidders had locked in debt financing to fund the mammoth buyout, with iGate and Apax procuring a reported $600 million from Barclays, Deutsche Bank and Standard Chartered Bank and JP Morgan, Nomura and Citigroup allegedly backing the Carlyle and Advent partnership with roughly the same amount.

General Atlantic's investment in Patni was its first Indian deal. It was completed in 2002 when the US-headquartered firm injected $100 million for a 21 percent stake in the IT services company, subsequently opened a Mumbai office and became an active investor in India’s tech sector. It is not known when General Atlantic reduced its holding in Patni to 16 percent.

General Atlantic has been looking to exit its stake in the company for several years now. Its most serious prior attempt came in 2007, when Patni was the subject of another bidding war involving Apax Partners and rivals which reportedly included private equity firms The Blackstone Group and The Carlyle Group, as well as software companies IBM and Computer Sciences Corporation. 

According to media reports at the time, that sales process was scuppered by the reluctance of Narendra Patni, one of the three founding brothers to sell his stake, then around 16 percent of Patni’s stock. His co-founders and brothers Gajendra and Ashok Patni, who then owned around 28 percent of the company between them, were said to be willing to divest their stake. 

Since then the company has received interest from various other parties, including Japanese trade buyer NTT Data, which, along with another unidentified strategic buyer, saw its offer for Patni fall by the wayside in this recent round of bids after failing to reach an agreement with the sellers.

Apax Partners’ partner on the deal, iGate, is a NASDAQ-listed business process service provider specialising in services such as consulting, enterprise data management and data warehousing, business intelligence and analytics, design, development, system integration, package evaluation and implementation, re-engineering and maintenance. It is based in Fremont, California.