Majesco Shares Surge After $594-Million Deal To Sell U.S. Arm To Thoma Bravo
Majesco signed a pact to sell its U.S. subsidiary to private equity firm Thoma Bravo, ramping up payouts to shareholders.
The Nasdaq-listed arm of the information technology company will be sold at $13.1 apiece, a premium of 71% to its closing price on July 17, according to the corporate announcement on exchanges. The deal values the company at $594 million.
Besides shareholders’ approval, the transaction will require Securities and Exchange Commission and HSR/antitrust approval in the U.S., and the Reserve Bank of India and 281-Income Tax no objection certificate in India. The deal is expected to close by the end of 2020.
Majesco India holds 74% in its U.S. arm, and will get $421 million, or about Rs 3,150 crore, from this deal. The company has a current market capitalisation of Rs 1,100 crore.
Post taxes, the cash accrual for Majesco will be Rs 2,550 crore, representing a fair value of Rs 850 apiece. That’s more than 120% premium to Majesco’s closing at Rs 382 apiece on July 20 on Indian bourses, according to broking firm Phillip Capital, which has the stock under review.
Majesco’s promoters, who hold over 38% equity in the company, said they would distribute the entire proceeds to shareholders in the form of buybacks and/or dividends.
Phillip Capital sees the transaction as a “fruitful culmination of the efforts put in by the Majesco management and patience with which the investors have supported the management over the years”. After this announcement, the financials and valuations of the company do not hold any significance, it said.
Shares of Majesco India hit the upper circuit at 5% for the sixth straight session. That compares with a 1.24% gain in the Nifty 50 Index.