Overview:
On 17 November 2022, Blackstone announced that it has signed definitive agreements with Satinder Singh Rekhi and other current promoters to purchase a majority in R Systems International.
The deal could set a precedent for similar M&A transactions, undergirded by majority private-equity ownership of listed assets eventually leading to the delisting of publicly traded companies.
About Blackstone:
Blackstone is the world’s largest alternative asset manager.
Its $951 billion in assets under management include investment vehicles focused on private equity, real estate, public debt and equity, infrastructure, life sciences, growth equity, opportunistic, non-investment grade credit, real assets and secondary funds, all on a global basis.
About R Systems:
R Systems is a one of the leading providers of Information Technology services, specializing in digital product engineering.
The firm partners with customers to enable or elevate their digital transformation with diversified digital offerings. Services and solutions span over five major business verticals i.e. technology, media, telecom and financial services.
Headquartered in Noida, India, the firm maintains 18 development and service centers to serve customers in North America, Europe, and APAC. It employs over 4,400 personnel worldwide.
Rationale of the transaction:
Blackstone will acquire c.52% stake in R Systems by paying INR 245 per share valuing the deal at $173m at an EV / Sales multiple of 1.9x and an EV / EBITDA multiple of 14.9x. Blackstone will also launch a conditional delisting offer at INR 246 per share.
The transaction is expected to be completed in the coming months, subject to customary closing conditions and regulatory approvals. Rekhi will continue to guide the company in his role as a non-executive advisor.
IT / ITeS has been one of the strongest investment thesis for Blackstone. In India, Blackstone has made investments of around $7bn into companies such as Mphasis, VFS, TaskUs IBS software, Intelenet, Simplilearn among others. In 2022, Blackstone closed out VFS for $ 2bn, ASK Wealth for $1bn and deployed $300m in Xpressbees.
The transaction will be the first of its kind after SEBI amended rules pertaining to delisting of equity shares of a company following an open offer as part of efforts to make merger and acquisition transactions for listed companies more convenient. The revised framework aims to make M&A for listed companies a more rational and convenient exercise, balancing the interest of all investors in the process.
The Chesapeake Group was not an advisor in this transaction.