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

Blackstone on Monday said funds managed by the private equity firm will acquire a majority stake in IT firm Mphasis Ltd, triggering an open offer for acquisition of up to 26 per cent stake for about Rs 8,262 crore.

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.

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$2-2.8 billion), the statement said.

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.

Meanwhile, Mphasis in a regulatory filing said Marble II Pte Ltd - the existing promoter of the target company - will sell up to 1,04,799,577 equity shares as part of the share purchase agreement signed on Monday.

This represents 55.31 per cent of the expanded voting share capital, it added.

"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," it said adding that the total consideration for the buyback is about Rs 8,262.23 crore.

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.

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

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 in the statement.

"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.

Photograph: Abhishek N Chinnappa/Reuters