Will Mphasis be another Blackstone successful exit story in 5 years time?
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Private Equity major Blackstone Capital Partners along with Marble II Pte. Ltd and Marble I Pte. Ltd has signed an agreement with Hewlett Packard Enterprise (HPE) to buy 50 odd percent of its stake in Mphasis along with a minimum commitment of $990 million which translate into close to $198 annually for next 5 years as a part of their 11 year contract.
Mphasis has been struggling to grow with their over dependency on HP business, which was depleting over last 5 years. The biggest positive is that there will be an assurance of minimum $198 million business annually from HP going forward which is lesser than its Dec 2015 revenue base projection contribution of $222 million from HPE.
Blackstone proposed to buy between 50.3 to 60.2% stake in Mphasis for INR 430 per share and made a mandatory open offer to acquire 26% at INR 457/share from minority stakeholders. Currently, HPE hold 60.5%, FIIs hold another 21.1% and remaining 5.6% is held by mutual funds. This is completely a rejuvenating shot for Mphasis, compared to its last 5 years’ performance and a very slow overall growth.
- Mphasis will be able to freeze the decline in HPE revenue at $198 million base revenue from HPE compared to last concluded $222 million revenue
- Mphasis get a preferred provider status
- Opportunity to tap into 80 odd Blackstone portfolio companies for IT Services with close to $1 billion IT spending
- Management is going to be the same- hence no major transition related flux in operations and uncertainties
- Management expertise from Blackstone will make Mphasis more profitable and growth focused, as they did with CMS or Intelenet performances over their invested period of time