ICICI Direct: Majesco India Sells U.S. Entity To Thoma Bravo
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ICICI Direct Report
Majesco U.S. (the U.S. listed company) has decided to sell its company to a private equity Thoma Bravo, LP at $13.1 per share, valuing the company at $594 million (Rs 4,455 crore). This offer price is at a 77% premium to the last closing price of Majesco U.S.. The company is valued at four times FY20 Enterprise value/sales. Majesco India (the India listed company) holds 74.07% stake in the U.S. entity (Majesco U.S.).
Hence, based on the stake, the company will receive cash of $420 million (Rs 3,154 crore).
Assuming a capital gains tax, the company would receive cash of approximately Rs 2,555 crore. This, coupled with cash of Rs 26 crore on the company's balance sheet, the total cash with the firm would be Rs 2,581 crore or approximately Rs 852 per share. The company plans to distribute this cash via dividend or buyback.
Assuming a 10% holding discount to cash and uncertainty on method of distribution we conservatively arrive at a target price of Rs 705 per share, 76% upside from current levels.
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