EDS makes $380m offer to buy 52% in MphasiS

EDS has made a conditional offer to buy 52% controlling stake in Bangalore-based MphasiS for about $380m as the world’s second-largest software services company seeks to compete better with arch-rival IBM and also expand its offshore presence in India. EDS will make a formal conditional open offer to all shareholders of MphasiS on Tuesday, seeking to buy 52% or 83m shares of the company at Rs 204.5 per share.

If the deal goes through, it will be the second-largest purchase by an overseas company in the domestic software services sector after Oracle's buyout of i-Flex.

Oracle’s acquisition of i-flex from Citigroup was the first at about $593m. EDS’ open offer will also be applicable to Barings Private Equity Partners (34.90% stake), the management (8.6% stake) and the remaining shareholders.

The price that EDS is paying — Rs 204.5 per share — represents an approximate 30% premium to the 26-week average price of MphasiS, according to EDS. MphasiS shares rose 3.6% to Rs 215.80. They have climbed 7.93% over the past week and 20.76% in the past month.

The rationale behind MphasiS’ acquisition is that EDS wants to ramp up its financial services practice to compete with IBM Global Services.