NYSE listed Information Technology (IT) giant Cognizant in talks for Genpact takeover

Cognizant is in talks for the acquisition of business process outsourcing firm, Genpact. Cognizant, the information technology giant said it is in advanced discussions with Genpact and will be making an announcement soon regarding its offer for Genpact. Genpact is a major business process outsourcing firm. The two firms, even thought listed in the New York Stock Exchange, have major delivery centers in India.

The Indian delivery centers are at the core of the firms’ Asian operations and to a large extent their global offering. But even so, reports have indicated that it may be long before an announcement is made regarding the success of the talks. According to sources from the investment banking industry, the deal is still in its infancy stages, despite the impressive progress of the talks, and will result in a deal.

Investment banking sources are hopeful the deal will most likely result in the two signing a takeover agreement, as the negotiations enter their advanced stages. But regardless, it is still too early to state if there will be a definite deal, said analysts. Cognizant spokesperson reiterated the firm is currently aiming at increased growth, a core part of its strategy. The firms however denied the conjecture over the planned deal, saying they do not comment on conjecture.

Reports further indicated that private equity firms and GE are also keen on a potential exit from Genpact. Genpact was previously a captive unit of GE, with GE controlling about 9.1 per cent holding in the firm. On the other hand, private equity firms General Atlantic and Oak Hill have a shareholding of 41.7 per cent while Wells Fargo owns about 5.71 per cent.

On the overall, the sum shareholding of these private equity firms adds to about 121.98 million shares and when tabulated at existing closing prices of Genpact on the New York Stock Exchange, values the firm at about $2 billion.

However, analysts have pegged the estimated price for the takeover higher than this valuation. But even so, should the deal go through, Cognizant may as well change the IT rankings in India, as the deal would give it an enlarged offering and portfolio. Cognizant had revenues of $3.27 billion last year and hopes to garner revenues of $4.46 billion this year.

As such, the resultant entity from the merger will be pegged at more than $5.58 billion in value, ranking close to India’s second biggest IT services firm, Infosys.

20 Sep 2010.