Blackstone Buying Controlling Stake in Mphasis For $2.8 Billion, Shares Gain

Shares of The Blackstone Group gained 5% on Friday after some of its private equity funds reached an agreement to acquire a majority stake in Mphasis Limited. The private funds, in partnership with Abu Dhabi Investment Authority, UC Investments, and other investors, have committed to paying $2.8 billion for the Indian IT outsourcing firm.

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The purchase price per share of Mphasis is between INR 1,452 and INR 1,497, representing a 12-16% premium of the company’s 12-month average price. It also represents a 3% to 6% discount to its 6-month average price. In 2016, a different Blackstone (BX) managed fund acquired a controlling stake in Mphasis from Hewlett Packard.

The Blackstone managed private funds and partner investors are acquiring a leading provider of Information Technology Services, specializing in cloud and digital solutions. Mphasis boasts deep domain expertise in the Banking, Financial Services, and Insurance sectors. The company has a long-term relationship with global customers.

“The company is exceptionally well-positioned given a terrific management team, strong order backlog, long-term strategic customer base, deep domain expertise in financial services, and a world-class suite of cloud and digital offerings. This investment enables us to continue creating value for the long term,” stated Amit Dixit of Blackstone Private Equity.

Blackstone shares are up about 61% year-to-date after an 89% pop in 2020. (See Blackstone stock analysis on TipRanks).

The acquisition drive follows Blackstone reporting impressive 1Q 2021 financial results. Base management fees came in at approximately $1.12 billion, in line with estimates of around $1.11 billion. According to Oppenheimer analyst Chris Kotowski, years of “broadening its revenue base with product line extensionsand innovations are paying sizable dividends.”

The analyst has reiterated a Buy rating on the stock.

“We believe that it deserves a premium to both the group and the market and it is in fact trading with one. We see the shares as attractive for long-term oriented growth investors that are less sensitive to valuation, but think that the shares are relatively fairly valued at present.” Kotowski wrote in a research note to investors.

Wall Street is cautiously optimistic on Blackstone, going by the Moderate Buy consensus rating based on 6 Buys and 5 Holds. The average analyst price target of $86.35 implies that shares are fully priced at current levels.

Blackstone Group scores a “Perfect 10” on the TipRanks’ Smart Score rating system, implying that it is likely to beat market expectations.