Patni board likely to discuss iGate deal today

MUMBAI, INDIA: The board of Indian software services firm Patni Computer Services was planning to meet on Monday, a source said, where it is expected to evaluate a deal to sell a majority stake to a consortium of iGate and Apax Partners in a deal worth more than $900 million.

Shares in Patni fell 2 per cent a day after iGate cancelled a press conference scheduled for Monday, at which it was expected to announce the agreement with Patni.

A source with direct knowledge of the matter told Reuters on Monday the two sides are still trying to pull together the deal.

"The significant corporate development that was set to be announced on Monday is off," an iGate spokesman told Reuters late Sunday, declining to provide further details.

The spokesman did not confirm whether the announcement was related to Patni, but a source close to the matter told Reuters on Friday that the press conference was scheduled to announce the deal.

"I wouldn't jump the gun today and says 'It's over,'" Arun Kejriwal, strategist at research firm KRIS in Mumbai, said. "The logic is that something has to be worked out, it will be done in two to three days. The Patni family has factions and if one of them is against the deal, they will need to iron it out."

The Patni family includes three founding brothers, who collectively hold about 46 percent of the company. Private equity firm General Atlantic was also looking to sell its roughly 17 percent holding in the software services exporter, sources had previously told Reuters.

Patni shares were trading at 467.50 rupees, down 1.9 percent, in Monday mid-day trade on the Bombay Stock Exchange.

Patni, a mid-sized IT services company also listed in New York, provides technology outsourcing services to industries such as insurance, telecoms, utilities and retail. Its clients include General Electric Co, Hitachi and Procter & Gamble Co's Gillette brand.

Small- and mid-cap Indian IT companies have been grappling with tepid demand, high attrition rates amid tough competition from larger rivals, and a rise in expenses.

Merging would allow mid-sized companies to increase scale and target bigger clients, but further consolidation in the software services sector is not imminent, analysts said.

"Not many other companies we have heard are looking to sell out," Tejas Doshi, head of research at Sushil Finance, Mumbai, said. "Barring for situational things like 3i Infotech where ICICI has a stake, you don't really see companies going out or selling off," Doshi said.

Media reports have said India's No. 2 lender ICICI Bank could sell its stake in 3i Infotech. Neither company was immediately available for comment.

"I see very little possibility of companies trying to buy revenue growth," Shashi Bhusan, sector analyst at Prabhudas Lilladher, said.

"It is too premature to say there will be a spate of selloffs after this deal," he said.

A consortium of Apax Partners and iGate was close to buying 63 percent of Patni Computer at about 500 rupees a share, a source had told Reuters recently. An expected deal for Patni had also been widely reported in the media.

The iGate-Apax consortium, which beat a rival team of Carlyle, Advent International and Akansa Capital to the deal, had planned to make an open offer for another 20 percent stake in Patni following the agreement, the source had said.

Talks to sell a stake in the software services exporter have been going on for about two years, but Patni has failed to finalize a deal due to valuation gaps with potential buyers, sources previously had told Reuters.