Patni Stake Sale in India - Seems 'Swayamvar' is on - Dec, 2010

Abstract

On the basis of the news making rounds, it seems the stake sale in Patni by promoters and General Atlantic seems to be in the final lap. While there was anticipation for the deal for more than 2 to 3 years, it appears probably some deal will be finalized this time. It needs to be seen what will be the final terms & conditions of the deal. However, on the basis of the market expectations, the deal price may be in the range of about Rs. 525 - 550 per share. However, it has to be carefully assessed if there is any 'non-compete fees' involved in the deal structure. If there is any such 'non-compete fees', then only promoters will be entitled for such fees. And, the minority shareholders will not be entitled for such non-compete fees. As we have seen in the case of Vedanta-Cairn deal, wherein Rs. 405 per share is offered to the promoters of the company. However, there was Rs. 50 per share of non-compete fees given exclusively to the promoters. Hence, this results into Rs. 355 per share for minority shareholders. After such structuring, the share price of Cairn has significantly corrected. Hence, the minority shareholders may need to be careful before venturing into investing into Patni, in the anticipation of the deal, as there is always a risk of 'non-compete fees' element in the structuring. An employee of Patni has created Infosys. An employee of Infosys has created iGate. Now, iGate is pursuing to buy Patni. What a turn of events! It needs to be seen who will be the final 'pati' to this Patni.