Hewlett Packard Enterprise said it has agreed to its equity stake in Bangalore IT services Mphasis to the Blackstone Group. Blackstones has agreed to purchase at least 84 percent of HPE’s stake in Mphasis for INR 430 per share. The private investor group will also buy the maximum amount of the remaining 16 percent stake that is permitted by Indian securities laws, subject to the outcome of a mandatory tender offer between signing and closing.
At the proposed price, HPE’s stake is valued at about USD 825 million. The transaction is expected to close in the second half of fiscal 2016, subject to agreed closing conditions. HPE said the sale is in line with its current capital allocation priorities and should not have any adverse impact on its ongoing commercial relationship with the company. HPE said it was indeed planning to renew the current master services agreement with Mphasis for another five years in connection with the transaction.
HPE recognized around USD 650 million of revenue and USD 110 million of operating profit from Mphasis, on a fully consolidated basis, in fiscal year 2015. HPE recognized USD 75 million of pre-tax earnings, representing its 60.48 percent ownership of Mphasis, in the same fiscal year. The sale of the equity position in Mphasis is not expected to impact the ability of HPE Enterprise Services to achieve its previously provided FY2016 operating margin outlook of 6-7 percent or longer-term 7-9 percent operating profit margin target.