Key Takeaways
- • Baring Private Equity Asia (BPEA) entered a definitive merger agreement to acquire all outstanding shares of Virtusa Corporation (NASDAQ GS: VRTU) for $51.35 per share in cash, a transaction valued at approximately $2.0 billion.
- • The price represents a premium of approximately 27% to Virtusa's September 9, 2020 closing price, and premiums of approximately 29% and 46% to the 30- and 60-trading-day VWAP, respectively.
- • The implied valuation is 16.2x Firm Value / LTM EBITDA as of June 30, 2020.
- • The deal was unanimously approved by Virtusa's Board, follows a process that began with an unsolicited proposal received July 20, 2020, and is expected to close in the first half of 2021, subject to shareholder approval and CFIUS review.
- • Orogen Group, whose CEO Vikram Pandit is a Virtusa director, has agreed via voting agreement to support the transaction, representing approximately 10% of voting power; insiders hold an additional approximate 5.7%.
Summary
Baring Private Equity Asia, one of the largest independent private equity firms in Asia with approximately $20 billion in assets under management, has agreed to acquire Virtusa Corporation for $51.35 per share in an all-cash transaction valued at approximately $2.0 billion, according to a joint announcement published via Business Wire. Virtusa is a global provider of digital strategy, digital engineering and IT services. The price represents a premium of approximately 27% to Virtusa's closing price on September 9, 2020, the last trading day before the announcement, and implies a valuation of 16.2x Firm Value / LTM EBITDA as of June 30, 2020.
The Virtusa Board unanimously approved the agreement. Lead Independent Director Rowland T. Moriarty said the transaction delivers a significant, immediate cash premium to shareholders and followed a process run with the company's financial advisors that included engagement with strategic and financial parties. The process began after the Board received an unsolicited proposal from an interested party on July 20, 2020. The company then signed non-disclosure agreements with five parties and engaged with two others. Chairman and CEO Kris Canekeratne described the deal as a strategic evolution for the company.
BPEA Managing Director Jimmy Mahtani said the firm is excited to partner with Virtusa in its next phase of evolution, citing the company's engineering heritage and domain expertise in digital and cloud transformation. BPEA cited six prior IT services investments dating back to 1998.
The transaction is expected to close in the first half of 2021. It is subject to Virtusa shareholder approval, customary regulatory requirements including clearance from the Committee on Foreign Investment in the United States (CFIUS), and customary closing conditions. It is not subject to a financing condition. The Orogen Group, which holds 108,000 shares of Virtusa convertible preferred stock and is led by Board member Vikram Pandit, has agreed to vote its shares in favor. Those preferred shares are convertible into 3,000,000 common shares. J.P. Morgan Securities and Citi advised Virtusa, with Goodwin Procter LLP as legal counsel. BofA Securities advised BPEA, with Ropes & Gray LLP as legal counsel.
The Virtusa Board unanimously approved the agreement. Lead Independent Director Rowland T. Moriarty said the transaction delivers a significant, immediate cash premium to shareholders and followed a process run with the company's financial advisors that included engagement with strategic and financial parties. The process began after the Board received an unsolicited proposal from an interested party on July 20, 2020. The company then signed non-disclosure agreements with five parties and engaged with two others. Chairman and CEO Kris Canekeratne described the deal as a strategic evolution for the company.
BPEA Managing Director Jimmy Mahtani said the firm is excited to partner with Virtusa in its next phase of evolution, citing the company's engineering heritage and domain expertise in digital and cloud transformation. BPEA cited six prior IT services investments dating back to 1998.
The transaction is expected to close in the first half of 2021. It is subject to Virtusa shareholder approval, customary regulatory requirements including clearance from the Committee on Foreign Investment in the United States (CFIUS), and customary closing conditions. It is not subject to a financing condition. The Orogen Group, which holds 108,000 shares of Virtusa convertible preferred stock and is led by Board member Vikram Pandit, has agreed to vote its shares in favor. Those preferred shares are convertible into 3,000,000 common shares. J.P. Morgan Securities and Citi advised Virtusa, with Goodwin Procter LLP as legal counsel. BofA Securities advised BPEA, with Ropes & Gray LLP as legal counsel.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.