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The Latin phrase, Veni, Vidi, Vici (I came, I saw, I conquered) has become
synonymous with victories, be it on the battlefield or the corporate boardroom.
And one such corporate takeover seems to be in the offing here in India. The
stage seems to be set for the grand Indian IT Swyamvara. Plano, Texas-based
Electronic Data Systems (EDS) $380 mn offer for 52 % stake (83 mn shares) in
MphasiS BFL has ended on June 5, 2006.
Baring India Investment has sold its entire 34.79% holding to EDS. Jaithirth
(Jerry) Rao, chairman and MD, has sold 1.9 mn shares to EDS. According to media
reports, BR Menon, director, MphasiS tendered 100,000 shares through the
employee stock options (ESOP) route. Another director, Richard Braddock was
allotted 60,000 shares through the ESOP route and his shareholding, post the
transaction stood at 0.51% of the paid-up capital. The signs are ominous.
If one were to go by the market indications, EDS will make a grand entry into
the Indian market, something it has wanted to do for a long time. India has been
EDS's Achilles heel for a long time, while its competition stole the march in
setting up operations on the Indian soil, EDS just stayed put. But, acquiring
MphasiS, one of India's successful IT companies, was quite good start.
Established in 1992 as BFL Software, it merged with MphasiS in year 2000 to
form MphasiS BFL. Meanwhile in the year 1998, Barings Private Equity Partners
purchased Bangur Company's stake in loss-making BFL Software and thus, came to
be associated with MphasiS BFL. Barings, currently owns 34.79% stake in the
company.
Over the years, MphasiS has increased its range services to cover the entire
spectrum. While MphasiS have operations in the US, UK Europe, Asia Pacific,
Japan, and Middle East, close to 65% of its revenues came from the US.
Traditionally, financial service and technologies business have been the
vanguard businesses in the past. The company was making a dedicated foray into
the healthcare solutions market, with its acquisition of US-based Eldorado
Computing in March 2005 and consulting market, with its acquisition of UK-based
Princeton Consulting in February 2005.
MphasiS has also been strong on the domestic front. For quite sometime, it
has been rumored that the management team at MphasiS and the single largest
investor, Barings have been at loggerheads. In the past, Barings had tried to
offload its equity, but did not get the price that it desired. According to
industry sources Temasek and Hinduja TMT had then offered around Rs 260 per
share, while Barings was bargaining for something in the range of Rs 350 – 400
per share. The deal did not go through.
Subsequently, the board of directors approved a buy-back scheme, aimed at
buying Baring's equity. But Rahul Bhasin, director, MphasiS, and managing
partner, Barings India Private Equity, denies that Barings were looking for a
buyer.
In May 2005, Barings had appointed Standard & Chartered Bank to advise it
for the different offers. Bhasin also denied any bad blood between him and the
management team, especially Jerry Rao.
In the wake of all these developments comes, an open offer from EDS in April
2006, to buy controlling stake in MphasiS for Rs 204.5 per share. The board of
directors backed the offer. The ball is fairly in the Barings's court.
Rao controls 3.97% stake in the company. Thus, for EDS's proposal (to own
52%) to materialize Barings had to offload its share of 34.79% and the rest
could come from other investors. Rao has already made an offer to sell 1% stake,
and according to sources he is keen to change his profile and jump into
winemaking business. Though, some reports suggest that Rao might garner a
key-post at EDS.
Everything will be crystal clear in a few days when the formal announcement
will be made, and it could turn out to be a great day for Indian IT. After all,
not everyday a company is bought out for Rs 1600 crore!
Shashwat Chaturvedi
mail@dqindia.com Page(s) 1
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