The Hindu : Business : EDS acquires majority stake in MphasiS

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Friday, Jun 09, 2006

Business

Business

EDS acquires majority stake in MphasiS

Special Correspondent

The conditional offer of EDS to buy 83 million shares sails through comfortably

— Photo: G. R. N. Somashekar

AGGRESSIVE STRATEGY: Stephen R. Heidt (left), Vice-President, EDS, with Jerry Rao, Chairman and CEO, MphasiS, at a press conference in Bangalore on Thursday.

BANGALORE: The conditional offer of Electronic Data Systems (EDS) of the U.S. to buy 83 million shares of MphasiS BPL Ltd., translating into a majority stake of 52 per cent in the company, has sailed through comfortably.

EDS had on April 3 made a conditional offer to buy 83 million shares of MphasiS at Rs. 204.50 per share in an all cash deal.

During the open offer that closed on June 5, more than the required 83 million shares of MphasiS were tendered by the shareholders.

The transaction, worth $380 million, marks the second largest deal in the Indian software services sector after U.S.-based business software maker Oracle Corp paid $593 million in August last to buy the 43 per cent stake held by Citigroup Venture Capital International in Indian banking software vendor i-flex.

Since the offer was for only 83 million shares, the excess shares tendered by the shareholders will be returned. "We will accept the shares proportionately in the ratio of participation/contribution,'' said an official with Citigroup Global Markets India Pvt Ltd, which managed the deal. Baring India Investment Limited, the biggest investor in MphasiS with a 34.73 per cent stake, sold its entire holding to EDS in the open offer, raking in close to Rs. 1,150 crore. Jerry Rao, CEO, MphasiS, also tendered a part of his holding in the open offer. The company is expected to make an announcement by June 20 on the total quantum of shares tendered during the open offer and the number of shares that were returned. The transaction is expected to be completed by the end of June subject to administrative settlement procedures.

Following the deal, MphasiS will continue to operate with its current management team and company name with Jerry Rao as the CEO and Jeroen Tas as Vice Chairman. EDS will appoint a majority of the MphasiS board of directors and is evaluating the consolidation of its existing India operations with the MphasiS operations.

"This is a critical milestone in our journey towards success,'' Steve Heidt, Vice President, Business Workforce and Capacity Management, EDS, told reporters here while announcing the transaction.

Mr.. Heidt said EDS would hire over 6,000 employees by the end of December as part of its expansion plans.

With 3,000 employees in India and the addition of another 11,000 from MphasiS, the total workforce of EDS in India was thus projected to exceed 20,000 by the end of the calendar year, he said.

Mr. Rao said the deal marked a "defining moment'' for MphasiS.

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