iGate to close Patni deal in a week, shares up

BANGALORE, INDIA: Software company iGate said it will close its $1.2 billion acquisition of Patni Computer Systems within a week, sending its shares up as much as 8 per cent.

"The open offer process for Patni has been completed and we got an oversubscription. We have gone with the mandatory 20 per cent," chief executive Phaneesh Murthy told Reuters.

Murthy, who expects the acquisition to close on May 12, said iGate will report consolidated quarterly results from the April-June quarter.

"It looks like the Patni integration process is tracking pretty well," Kaufman Bros analyst Sachin Jain said.

Getting the uncertainty regarding the deal's closure out of the way seems to have boosted investor sentiment, he said.

CEO Murthy said he is aiming for a gross margin of 40-41 per cent for the combined company within two years.

IGate, which competes with the likes of Infosys Technologies, Cognizant Technologies Services Corp and Genpact Ltd, expects second-quarter sales for the combined company to be flat on a sequential basis.

For the first quarter, excluding items, iGate earned 23 cents a share, falling shy of analysts' estimates of 27 cents a share, according to Thomson Reuters I/B/E/S.

This followed a disappointing annual sales forecast by Infosys, India's No. 2 software services exporter, on slower client spending.

"Delays in clients' budgets created softness in the market," Murthy said. "I think project spending budgets have started coming back."

Fremont, California-based IGate, backed by private-equity firm Apax Partners, in January acquired a majority stake in India-based Patni for $1.2 billion in one of the largest deals in India's technology sector.

The company's shares, which have shed 11 percent of their value since it announced its Patni buy, last traded up 7 per cent at $18.01 on Thursday on Nasdaq.