Shares of Majesco have shot up over 20 per cent this week after its US arm signed an amended agreement to sell Majesco US to the private equity firm, Thoma Bravo.
The revised price is $16 per share, up from the earlier offer of $13.1 per share, valuing the company at $729 million (Rs 5,467 crore). The revised offer from Thoma Bravo came after Majesco received an acquisition proposal from an unaffiliated third party.
This development has come as a further bonus for domestic shareholders. Already, Majesco’s stock has skyrocketed from Rs 350 levels to Rs 630 following the earlier offer.
Shares of Majesco ended at Rs 786 on Thursday, up 22 per cent over it last week's close of Rs 646.
Analysts have been quick to revise upwards the target price for the stock.
“Majesco India (the India listed company) holds 74.07% stake in the US entity (Majesco US). Hence, based on the stake, the company will now receive $513.8 million in cash (Rs 3853.3 crore). Assuming a capital gains tax, the company would receive Rs 3,121.2 crore in cash. This, coupled with Rs 23.5 crore in cash on the company's balance sheet, the total cash with the firm would be Rs 3,144.7 crore or Rs 1,037 per share,” said ICICI Direct in a note.
The brokerage has, however, set a conservative price target of Rs 785 on the stock.
“The company plans to distribute this cash via buyback and/or dividend. Considering the uncertainty on the method of distribution, we conservatively revise our target price to Rs 785 per share, 22 per cent upside from current levels,” the note adds.
Majesco US's board of directors has unanimously approved the merger and recommended that shareholders approve the merger. Majesco India's board also approved the revised deal on August 8. The transaction is expected to be completed by the end of 2020.
According to the initial agreement, Majesco US was to be sold to Thoma Bravo at $13.1 per share, valuing the company at $594 million or Rs 4,455 crore. The offer price at the time was at a 77 per cent premium to Majesco US' closing price during that time. Mastek, which holds around 6.5 per cent stake in Majesco US, has seen its share price rise by 66 per cent since July 20. Majesco provides cloud insurance software solutions for the insurance business.