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Tax Angle causes iGate-Patni deal a week's delay
By siliconindia
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Tuesday, 04 January 2011, 18:17 IST |
3 Comments
Bangalore: The iGate-Patni deal has brought out a controversial angle in the regular dealings. The deal is being re-structured because of some last minute tax issues in the structuring of the off-shore transaction amounting to a couple of million dollars.
The tax issues relate to Narendra Patni's holdings in Patni Computer, which are held through a U.S. firm, Isolutions. "The issue cropped up about half-an-hour before the details were finalized, delaying the share purchase agreement," said one of the people. iGate was earlier expected to announce the acquisition on Monday.
Although several unsuccessful attempts have been made by the Patni brothers and the private equity firm General Atlantic to sell their stake in the past, as stated by the people, this time the deal is nearly done with iGate wherein they plan to sell their entire 63 percent stake in the software exporter. Out of the remaining stakes, 46 percent are held by the three Patni brothers, Narendra, Ashok and Gajendra while the General Atlantic has 17 percent stake. General Atlantic had invested about 
133 a share in 2002 in Patni.
Apax Partners have chosen to back up the bid of iGate and is nearly putting in $400 dollars. In order to help with incorporation and reorganization once a formal announcement is made, iGate has shortlisted Deloitte Haskins & Sells and HR firm Mercer. Conditions like performance guarantees have been listed by Apax so that if it fails to meet the performance benchmark, Apax's shareholding could go up. "If the performance clause is breached, iGate can end up becoming an Apax company," as stated by a shareholder in the company.
525 a share is the estimated amount for the share purchase agreement for the 63 percent stake in Patni. Minority shareholders will not be entitled if the price paid to the promoters includes a non-compete fee. "As we have seen in the case of the Vedanta-Cairn deal, 405 per share is offered to the promoters. However, there was 50 per share of non-compete fees given exclusively to the promoters. Hence, this results into 355 per share for minority shareholders," said Jagannadham Thunuguntla of SMC Global Securities.
133 a share in 2002 in Patni.
Apax Partners have chosen to back up the bid of iGate and is nearly putting in $400 dollars. In order to help with incorporation and reorganization once a formal announcement is made, iGate has shortlisted Deloitte Haskins & Sells and HR firm Mercer. Conditions like performance guarantees have been listed by Apax so that if it fails to meet the performance benchmark, Apax's shareholding could go up. "If the performance clause is breached, iGate can end up becoming an Apax company," as stated by a shareholder in the company.
525 a share is the estimated amount for the share purchase agreement for the 63 percent stake in Patni. Minority shareholders will not be entitled if the price paid to the promoters includes a non-compete fee. "As we have seen in the case of the Vedanta-Cairn deal, 405 per share is offered to the promoters. However, there was 50 per share of non-compete fees given exclusively to the promoters. Hence, this results into 355 per share for minority shareholders," said Jagannadham Thunuguntla of SMC Global Securities.
