Virtusa acquires majority interest in Polaris Consulting

Mar 07, 2016 (LBO) - Virtusa Corporation announced that its India subsidiary has acquired all of the outstanding shares of Polaris Consulting and Services held by Arun Jain, founder and chairman of Polaris, the company said in a statement. "Virtusa Corporation announced that its India subsidiary, Virtusa Consulting Services Private Limited, has acquired all of the outstanding shares of Polaris Consulting & Services held by Arun Jain, founder and chairman of Polaris, Orbitech Private Limited, and certain other minority stockholders, representing an aggregate of approximately 51.7 percent of the fully diluted outstanding shares of Polaris for an average of 3.12 US dollars per share for an aggregate purchase consideration of 165.89 million US dollas," it said. Jitin Goyal will remain CEO of Polaris, and was appointed President, BFS, to lead Virtusa’s and Polaris’ business operations serving the banking and financial services verticals. Raj Rajgopal, President of Virtusa, was appointed President, ETS, and will lead Virtusa’s and Polaris’ operations serving the insurance, communications & technology, and media, information & other verticals. “We are extremely pleased to close phase one of the Polaris transaction and we look forward to completing the mandatory open offer to Polaris’ public shareholders," Kris Canekeratne, Chairman and Chief Executive, Virtusa Sri Lanka said. "Combined, Virtusa and Polaris create a robust platform and a unique and compelling value proposition.  We are enthusiastic about providing end-to-end solutions and services in banking and financial services, greatly expanding our addressable market and positioning us well to pursue larger consulting and outsourcing opportunities.” Beginning on March 11, 2016, Virtusa will commence an unconditional mandatory open offer to Polaris’ public shareholders to purchase up to an additional 26 percent of the outstanding shares of Polaris, the statement added. The aggregate price for the shares to be purchased in such offer, assuming full tender and the offer price remaining unchanged, is estimated at approximately 86.1 million US dollars. Upon closing of the mandatory offer period on March 28, 2016, and assuming full tender, and settlement of the tendered shares by April 12, 2016, Virtusa will own a 74.99 percent majority interest in Polaris. In support of the transaction, on February 25, 2016, Virtusa entered into a credit agreement with a syndicated bank group jointly lead by JPMC and Bank of America Merrill Lynch - which replaces Virtusa’s existing 25.0 million US dollars credit agreement and provides for a 100 million US dollars revolving credit facility and a 200 million US dollars delayed-draw term loan. Virtusa drew down in full the 200 million US dollar term loan to fund the transaction. Interest under these facilities accrues at a rate per annum of LIBOR plus 2.75 percent subject to step-downs based on the Company’s ratio of debt to adjusted earnings before interest, taxes, depreciation, amortization, and stock compensation expense (“EBITDA”). The Company intends to enter into an interest rate swap agreement to minimize interest rate exposure. The Credit Agreement includes customary minimum cash, maximum debt to EBITDA and minimum fixed charge coverage covenants. The term of the Credit Agreement is five years, ending February 25, 2021.