The deal could set a precedent for similar M&A transactions, undergirded by majority private-equity ownership of listed assets eventually leading to the delisting of publicly traded companies, experts told ET.
Blackstone will acquire shares from Satinder Singh Rekhi and other promoters, who together hold 52% in the company. Blackstone will pay Rs 245 a share and will also launch a conditional delisting offer, at a price of Rs 246 per share.
The transaction is expected to be completed in the coming months, subject to customary closing conditions and regulatory approvals. Rekhi will continue to guide the company in his role as a non-executive advisor, the company said in a statement.
The transaction will be the first of its kind after Securities and Exchange Board of India (Sebi) amended rules pertaining to delisting of equity shares of a company following an open offer as part of efforts to make merger and acquisition transactions for listed companies more convenient. The revised framework aims to make M&A for listed companies a more rational and convenient exercise, balancing the interest of all investors in the process, Sebi said last December.
As per new Sebi norms, if the response to the open offer leads to the delisting threshold of 90% being met, all shareholders tendering their stock would be paid the indicative price.
R Systems, founded in 1993 by Satinder Singh Rekhi, is one of the leading providers of digital IT services, specializing in product engineering, and serves more than 250 customers in technology, media, telecom, and financial services sectors globally.
is a partner of choice for enterprise customers with a strong suite of capabilities in product engineering, artificial intelligence, data analytics, internet of things, robotic process automation and cloud, employing over 4,400 people across 18 delivery centers in North America, Europe, Asia Pacific, and India.
The company’s revenue for the last twelve months, as of September 30, 2022, was Rs 1,445 crore (~$189 mm), registering a 36% year on year growth.
“R Systems has been a reliable long-term partner to marquee global customers, guiding them on their digital transformation journeys,” said Mukesh Mehta, Senior Managing Director, Blackstone. “As a leader in outsourced software product development, R Systems is well-positioned to benefit from digitalization tailwinds, shorter product launch cycles and increased openness to outsource product development. This investment follows Blackstone’s long-standing conviction in IT services and builds on the firm’s robust track record in the sector globally.”
BDA Partners acted as the financial advisor to the sellers of R Systems. AZB & Partners acted as legal advisor to the sellers. KPMG, Cyril Amarchand Mangaldas and Simpson Thacher & Bartlett acted as advisors to Blackstone.
“Considering the changing M&A landscape, the market regulator proactively amended delisting regulations to ease the overall M&A process a bit more investor friendly. Big-ticket investors like Blackstone seem to be taking the full use of the new guidelines and so, this deal may turn into a milestone transaction. Buyout firms are expected to make use of this new set of rules in the future,” said Pankaj Singh, Managing Partner, Connesso Consulting, a Delhi-based advisory and consulting firm. “This is also expected to increase the appetite for controlling transactions as there would be many more PE funds looking to explore beaten down and at the same time, quality listed companies.”
Shares in R Systems surged 14.5% to Rs 269.1 following the announcement.
IT / ITeS has been one of the strongest investment thesis for Blackstone.
In India, Blackstone has made investments of around $7 billion into companies such as
, VFS, TaskUs IBS software, Intelenet, Simplilearn among others.
In 2022, Blackstone closed out VFS for $ 2 billion, ASK Wealth for $1 billion and deployed $300 mn in Xpressbees. Another $360 million is getting deployed in R Systems.