Blackstone (NYSE:BX) today announced that private equity funds managed by Blackstone have entered into a definitive agreement with Hewlett Packard Enterprise (NYSE: HPE) to buy a majority stake in Mphasis Limited, a leading Information Technology services provider offering Applications, Business Process Outsourcing and Infrastructure Services. This deal represents the largest acquisition by Blackstone in India.
HPE currently owns 60.5% of Mphasis. Blackstone will pay a purchase price of INR 430 per share to HPE. Mphasis is listed on the National Stock Exchange (NSE: Mphasis) and Bombay Stock Exchange (BSE: 526299) in India. As per the Takeover Code in India, this transaction will trigger a mandatory open offer for a purchase of additional 26% shares of the company and the acquiring entity has released a public announcement to the stock exchanges. Based on the open offer subscription, the purchase price consideration will vary between INR 5,466 crore and INR 7,071 crore (or, approximately $825 million – $1.1 billion).
HPE and Blackstone have agreed on the terms of a Master Services Agreement (MSA) which HPE proposes to sign with Mphasis, post approval by Mphasis’ Board of Directors and shareholders. The duration of the MSA is five years with three automatic renewals of two years each. Under this MSA, HPE has proposed to commit a minimum revenue amount escalating year over year and totaling $990 million over the next five years. Also, Mphasis will be included in HPE’s Preferred Provider Program opening up significant additional revenue opportunities.
Mphasis’ last twelve months revenue as of December 31, 2015 was INR 59,996 mm (~USD 904 mm) and Profit after Tax was INR 6,923 mm (~USD 104 mm). It has deep vertical expertise in Banking, Financial Services and Insurance (BFSI) sector and strong portfolio focus on New Generation Services including Digital solutions. Mphasis serves marquee customers across the globe including 6 top global banks, 11 out of 15 top mortgage lenders, and 3 top global insurance companies. The company has roughly 24,000 employees across 16 countries.
Mphasis was recently named by American Banker and Bank Administration Institute (BAI) as one of the top companies in FinTech and as the “Most Distinguished Digital Company in 2015” by The Economic Times.
The sale is expected to complete in the coming months, subject to customary closing conditions and approvals.
Amit Dixit, Senior Managing Director and Co-Head of Private Equity in India at Blackstone, said: “We are impressed by Mphasis’ strong domain expertise in Banking, Financial Services and Insurance vertical. Its deep relationship with marquee global customers has enabled it to deliver growth above the industry average in its Direct International segment. We see large potential going forward driven by Mphasis’ world-class delivery capabilities and its access to Blackstone’s portfolio of companies across the globe. The company has an experienced management team who has a clear roadmap for company’s growth. With a long-term commitment of company’s largest customer, HPE, we are confident that Mphasis will scale new heights.”
Blackstone is one of the world’s leading investment firms. We seek to create positive economic impact and long-term value for our investors, the companies we invest in, and the communities in which we work. We do this by using extraordinary people and flexible capital to help companies solve problems. Our asset management businesses, with over $330 billion in assets under management, include investment vehicles focused on private equity, real estate, public debt and equity, non-investment grade credit, real assets and secondary funds, all on a global basis. Blackstone has been investing in India since 2005 and has committed to investments over $6 billion in private equity and real estate. Further information is available at www.blackstone.com. Follow Blackstone on Twitter @Blackstone.