Nasdaq-listed iGate, owned by former marketing head of Infosys Phaneesh Murthy, on Monday said it has bought nearly 63 percent stake in India’s sixth biggest software exporter Patni Computer Systems for $1.22 billion in shares.

iGate has reworked its deal with Patni by agreeing to buy 45.6 percent of the shares of the founders of Patni Computer Systems, Narendra Patni, Gajendra Patni and Ashok Patni and another 17.4 percent stake of private equity firm General Atlantic at 503.5 rupees a share, amounting to about $921 million, iGate chief executive Phaneesh Murthy told reporters in Bangalore.

The transaction is valued at about $1.22 billion, including the mandatory 20 percent open offer to be made to the public shareholders of Patni, Murthy said.

The deal is expected to be completed in the first half of 2011 after getting the regulatory approvals, he said, adding iGate has committed financing of $750 million for the deal.

iGate expects the transaction to add to its cash earnings by 2012. In a statement, iGate said, "The acquisition will create a differentiated company with scale in many verticals."

Post-merger the combined enterprise will generate $1 billion in revenue.

Murthy informed that iGate expects to finance the deal through a combination of cash, debt and equity financing, including a potential public offering of up to 10 million shares.
Viscaria Limited, a company backed by funds advised by Apax Partners, will make an investment into iGate to facilitate the acquisition of a majority stake in Patni.

iGate has agreed to sell to Viscaria Limited $270 million of preferred stock convertible into common stock with a conversion price of $20.30 per share.

The preferred stock investment by Viscaria may be increased by up to an additional $210 million based on the subscription in the open offer process and in the event that the company elects not to move forward with a public offering.

Details of the preferred stock transaction will be included in a filing on Form 8-K, which iGate expects to file shortly. iGate has also secured commitments for debt financing of up to $700 million in the aggregate from Jefferies & Company, Inc. and RBC Capital Markets to fund the buy.

“The objective is to synergize the leadership team of both iGate and Patni to create, over time, a world-class integrated leadership team which will drive the combined company to newer horizons,” Murthy said on the acquisition.

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