Acquiring Patni Computer Systems? Really??

by Jamsheed Gandhi    Dec 29, 2010

Patni AcquisitionPatni Computer Systems (PCS)[PATNI], established in 1978 by the Patni brothers namely, Narendra, Gajendra and Ashok, is one of India’s earliest IT services company. It ranks as the country’s sixth largest IT company and is also the company where N. R. Narayana Murthy was employed, met six other engineers, and went on to create Infosys Technologies (INFOSYSTCH) with an initial capital of US$ 250.

As per information displayed on the company’s website, PCS has over 16,000 employees and revenues of over $650 million. The ownership of the company largely rests with the Patni Brothers who hold close to 46 percent, with PE firm General Atlantic holding between 16 to 18 percent stake.

PCS has been regularly in the news since the past few years due to rumors about its impending acquisition by various entities, both domestic and international.

Below is an effort at listing the numerous times that the company was courted, wooed, but a union never fructified. This time around the cacophony surrounding its latest admirer; US-based iGate Corporation has reached unprecedented proportions. As the turn of events would show in the below timeline, with PCS, the deal is never done unless a statement of confirmation is issued by the company. Every time the media reported on various companies wanting to buy PCS, not once was a quote attributed to the management of either PCS or the various companies interested in acquiring it. Each time reports citing “people close to the company” or “sources in the know” declaring a “done deal” have fallen flat on their faces.

The view in the market is of caution to all those who are either interested in getting into the PCS stock at this stage. CXOtoday.com has been speaking daily to senior PCS management as well as reaching out to the management of iGate only to be brick walled. On continuous probing it appears that none of the senior management teams from both PCS and iGate have been officially intimated on any such acquisition or intent.

Corporate governance and minority shareholder rights have been given the back seat once again. A company that has such a history of rumored acquisitions should have some information dissemination process to mitigate speculations that seem to erupt early but always lead to a dead end.

In-spite of whatever negative connotations PCS as a company might have in the marketplace, it has a good delivery process in place and has been able to keep its customers happy.

We will, however, continue to track the developments on PCS’s most recent suitors and wait and see if this time around the belle of the ball does end up eating the wedding cake.

PCS Acquisition Timeline

December 2010

Media reports an almost “done” deal with iGate Corporation picking up the Patni brothers stake in the company. iGate is supposed to have partnered with PE firm Apax Partners for this. Competing with iGate is private equity behemoth, the Carlyle Group, who has joined forces with Advent International for this buyout. None of the reports site any official quote from any of the parties with PCS issuing this statement -”Patni as a company policy doesn’t comment on market speculation”, said a company spokesperson.

Market is awash with the report of the deal being sealed between Rs. 500 to Rs. 550 per share.

July 2010

Straight talking L&T supremo Anil Manibhai Naik, or A.M. Naik, as he is popularly known, comments in an interview to a financial daily on speculation that L&T Infotech is interested in PCS. Naik says that while acquiring PCS would have put L&T Infotech in the $1 billion league, it would be insufficient as he feels a company needs to have a minimum market cap of $3 billion to play in the big league.

May 2010

Media reports state Japan’s NTT Data Corp and Fujitsu as well as L&T Infotech, the IT company of infrastructure major - Larsen & Toubro, are all in the race to acquire PCS. Reports are based on unnamed sources who refused to be named as they were not authorized to speak to the media. According to media reports, PCS stake sale is pegged between Rs.. 625 to Rs 675 per share, while a price of Rs 700 to Rs 750 is expected by the Patni brothers for their shares.

November 2009

Media reports had even earlier linked L&T Infotech as a strong acquirer for the majority stake in PCS. Stock trades at Rs 480. Unnamed sources once again cited in all reports.

August 2007

Media reports that PE firms Texas Pacific Group and Apax Partners have been in talks to buy out the stake owned by Gajendra and Ashok Patni. Exiting investor General Atlantic is interested in selling its stake in PCS, claim the rumors. The PCS stock trades around the Rs. 420 mark. Reports also emerge of private equity players such as Cerberus, Carlyle, and Blackstone being interested to pick up a majority stake. The sale is expected to be closed between Rs 650 to Rs 700 per share. Once again unnamed sources are used for this information and all parties mentioned issue statements denying such talks.