Majesco share price hits upper circuit on board's nod to sell US subsidiary

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Majesco share price hit 5 percent upper circuit on July 21 after the company board agreed to sell its US subsidiary to private equity firm Thoma Bravo.

The stock, which has jumped almost 40 percent in the last three months, was trading at Rs 401.15, up Rs 19.10, or 5 percent, at 1007 hours.  There were pending buy orders of 1,009,936 shares, with no sellers available.

The Nasdaq-listed arm of the IT company will be sold at $13.1 apiece, a premium of around 74 percent to its closing price on July 17, according to the corporate announcement on exchanges. The deal values the company at $594 million.

The board of the directors at its meeting on July 20 approved the sale of the company’s entire stake/ investment in the US subsidiary pursuant to the merger, subject to the approval of the shareholders of the company and other regulatory and statutory approvals, as may be required, the company said in a filing to the exchanges.

The gross value to be received by the company for its stake in US subsidiary in the merger is $420.66 million, compared to the total investments made by the company of $68.67 million, to date. The company has a current market capitalisation of Rs 1,100 crore.

"Parent company Majesco India will divest its entire 74 percent stake in the US arm and will get $421 million in cash by the sale of the US arm. The company plans to distribute the entire amount to shareholders. via a combination of buyback and dividends," Farid Kazani, MD and Group CFO, told CNBC-TV18.

"Majesco India will be left with some real estate and will go through a dissolution process once sale proceeds are distributed."

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.