Baring PE acquires Virtusa Corp. (NASDAQ: VRTU).

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Baring PE will acquire the outstanding common shares of Virtuas for $51.35 per share in a cash only transaction
The USD 51.35 per share implies 16.2 times the enterprise value/12-month EBITDA at June 30, 2020.
The transaction is expected to close in the first half of 2021.

On September 10, Virtusa Corporation (NASDAQ: VRTU) announced that it has signed a definitive merger agreement with Baring Private Equity Asia (BPEA). Baring PE will acquire all of the outstanding common shares of Virtuas for $51.35 per share in a cash only transaction, representing a valuation of the transaction of approximately $2.0 billion.

The $51.35 per share represents 16.2 times the goodwill / EBITDA for the last twelve months ended June 30, 2020, and represents a premium of approximately 29% and 46%, respectively, to the volume weighted average price of shares of Virtusa Corporation (NASDAQ: VRTU) over 30 and 60 days. On July 20, the Board of Directors of Virtusa received an unsolicited acquisition proposal from an interested party.

Rowland T. Moriarty, Lead Independent Director of Virtusa’s Board of Directors, said: “We are pleased to maximize value with this transaction and to offer Virtusa shareholders a substantial, immediate cash premium. Today’s announcement is the culmination of a process by Virtusa and our financial advisors that included working with strategic and financial parties on a potential transaction, and after a thorough review, the Board of Directors unanimously concluded that this transaction with the BPEA with a cash premium achieved the Board’s objective.

Virtusa, headquartered in Massachusetts, is a global provider of digital and information technology outsourcing services. Virtusa offers technology consulting and implementation, business process management (BPM), mobility, management consulting, cloud and application outsourcing services. The company has offices throughout America, Europe, the Middle East and Asia with global delivery centers in the United States, India, Sri Lanka, Hungary, Singapore, Poland, Mexico and Malaysia.

Source: Presentation for investors of Virtusa Corporation
Source: Presentation for investors of Virtusa Corporation

Baring Private Equity Asia is one of the largest independent PE firms in Asia with approximately $20 billion in assets under management. Since the BPEA was established in 1997, the private equity firm has made six previous investments in the information technology services industry.

The Orogen Group holds 108,000 shares of Virtusa Convertible Preferred Stock. The 108,000 shares of Convertible Preferred Stock held by Orogens can be converted into 3,000,000 shares of Virtusa common stock. It represents approximately 10% of the voting rights in the Company. The CEO of Orogens Group, Vikram Pandit, who is an independent member of the Board of Directors, has entered into the voting agreement in which he will vote for the transaction. The directors and officers, who together hold approximately 5.7% of the voting rights in the Company, will also vote in favor of the transaction.

The transaction is expected to close in the first half of 2021.

Closing of the transaction is subject to Virtusa’s shareholder approval, necessary regulatory approvals, including the approval of the Committee on Foreign Investment in the United States (CFIUS), and customary closing conditions.

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