BFL acquires MphasiS in Rs 625 cr. deal

CIOL Bureau
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BANGALORE: BFL Software will take over MphasiS Corporation of the US in an all-stock deal. While the two companies have not stated the total size of the deal, it is expected to be close to Rs 625 crore.

The BFL Software board will meet on February 14 to consider a proposal to issue 6.5 million equity shares on a preferential basis in exchange for all common stock equivalent securities of MphasiS. This implies that MphasiS Corporation, a privately held company, is valued at over Rs 600 crore or close to $140 million, taking into account the current stock price of BFL Software. BFL will have to set a date for pricing its preferential allotment in its board meeting on Monday. MphasiS Corporation will become a wholly owned subsidiary of BFL Software. Jerry Rao, promoter of MPhasiS, who formerly headed Citibank's Development Division and Chairman and CEO of Transaction Technology Inc, will head the combined entity.

The total equity of BFL is 9.3 million shares. The company will opt for an equity dilution by issuing 6.5 million shares to MphasiS shareholders. The total equity of BFL will increase to 15.8 million shares. Barings already holds 52 per cent of BFL Software, which will come down to around 33 per cent in the combined entity, while MphasiS shareholders will own around 40 per cent, the rest will be held by the public. Enam Financial Consultants advised BFL and DSP Merrill Lynch advised MphasiS.

According to a company press release, the issue will follows Sebi guidelines on pricing of preferential issues. The deal is subject to the approval of regulatory authorities in India and the US, the respective boards, and shareholders. The combined entity will be a player in the high-value `Interactive Architect' IT segment that is estimated to grow from $8 billion to $80 billion by 2003, according to Forrester Research. "Interactive Architects'' are a new breed of companies which provide Web-enabled solutions for both established companies and Internet start-ups. MPhasiS, which is a part of this segment, also has domain expertise in the financial vertical. The combined entity will have 1300 employees, 17 marketing offices worldwide and 3 development centres in India.