Blackstone to acquire majority stake in IT firm R Systems; stock zooms 20%

Shares of R Systems International rallied 20% to ₹281.25 in intraday trade on Thursday after U.S.-based investment fund Blackstone Inc proposed to acquire a majority stake in the homegrown IT services firm. The private equity firm has offered to buy a 52% stake in R Systems International for $359 million (₹2,904 crore). As per the deal, the offer price has been fixed at ₹245 per share, a premium of around 4% to R Systems’ closing price on Wednesday.

“Blackstone today announced that private equity funds managed by Blackstone have signed definitive agreements with Satinder Singh Rekhi and other current promoters to purchase a majority stake in R Systems International,” the American investment company said in a release. 

Founded in 1993 by Satinder Singh Rekhi, promoter and MD & CEO of the company, the technology and analytics services firm employs over 4,400 people across 18 delivery centres in North America, Europe, Asia Pacific, and India. The company is engaged in product engineering, artificial intelligence, data analytics, internet of things, robotic process automation, and cloud. R System’s revenue for the last twelve months, as of September 30, 2022, was ₹1,445 crore ($189 million), registering a year-on-year growth of 36%.

As per data available on the BSE, Rekhi and the other promoters currently own 51.67% stake in R Systems, which will be acquired by Blackstone at ₹245 apiece. The deal will fetch around ₹1,497 crore to the promoters.

Besides, Blackstone will also launch a conditional delisting offer, at a price of ₹246 per share. “The transaction is expected to be completed in the coming months, subject to customary closing conditions and regulatory approvals. Dr. Rekhi will continue to guide the company in his role as a non-executive advisor,” Blackstone said in the release.

Commenting on the deal, Mukesh Mehta, senior managing director at Blackstone, said: “…This investment follows Blackstone’s long-standing conviction in IT services and builds on the firm’s robust track record in the sector globally. We are excited to partner with the current management team to support the company’s next phase of growth, both organically and through strategic acquisitions. I am aware of the great work that Dr. Rekhi has done research in the field of the science of Happiness, and the Blackstone team is looking forward to working with him.”

Speaking on the development, Satinder Singh Rekhi, CEO of R Systems, said: “I am excited that our partnership with Blackstone will take R Systems on the path to its next level of growth. Today, R Systems is a well-known product engineering brand that attracts top-notch talent looking to work on cutting-edge solutions for our global clients.”

“The company’s management team will be excited to welcome Blackstone and benefit from their scale, expertise, and global track record in IT services. Our employees, customers, and partners will gain immensely from this partnership with Blackstone. I am happy for my new role as an advisor to the company under Blackstone’s ownership,” he added.

BDA Partners acted as the financial advisor to the sellers of R Systems. AZB & Partners acted as legal advisor to the sellers. KPMG, Cyril Amarchand Mangaldas and Simpson Thacher & Bartlett acted as advisors to Blackstone.