Midcap IT services company MphasiS is likely to witness management buyout. A consortium led by senior management of MphasiS and private equity (PE) players is eyeing Hewlett Packard’s (HP) stake in the company and may be gearing up funds worth USD 1.4 billion, reports CNBC-TV18’s Kritika Saxena quoting exclusive sources.
HP has indicated that it is interested in looking at selling stake and has invited expression of interest (EoI). The formal date for bidding is expected to be given out to prospective buyers and EoIs are being collated. According to sources, Carlyle, Blackstone and Bain are those three consortiums who have expressed interest. Initially, when CNBC-TV18 broke the story these three names were on the look out for this particular stake.
One of the consortium is led by the management of Mphasis including around four-five former executives of HP. They are the face of the consortium and financial backing is largely coming in from PE players who have been expressing interest to pick out that stake. Sources indicate that they are likely to backout, but, that hasn't officially happened yet.
From the deal that is being worked out between these players, the valuation comes up to around USD 1.4 billion, this is a premium to the current market price. From the kind of information CNBC-TV18 has as far as funds collated by various consortiums are concerned, this seems to be higher. Given the volatile market, HP has not given a definitive timeline, but the deal closure timeline could be in the second half of calendar year 2013.
HP holds 60.40 percent, which is entirely going to be sold off, Baring Private Equity holds around 4.3 percent, Aberdeen Global holds around 14.96 percent.
Aberdeen is likely to join the race along with this consortium in the management buyout and increase its stake in Mphasis. Aberdeen and Baring are facilitating and helping the private equity and management players to do an official buyout.
Interestingly, Aberdeen released a report in June - India Opportunities Fund where it said that Mphasis stock has outperformed because of private equity interest in HP stake in Mphasis. So, that was a kind of confirmation coming in, but one can’t read too much into it.
It is also learnt that company's founder Jerry Rao has been asking Advent and a couple of other private equity players for the same. While Rao is interested, that entire consortium may back out. But, since it is just an expression of interest one cannot be whether the players are in or out.
Both MphasiS and HP have declined to comment on this news. At 12:06 hrs MphasiS was quoting at Rs 420.00, up Rs 12.45, or 3.05 percent.