HP to buy EDS Mphasis share holders are lucky

Shareholders of MphasiS have some reason to cheer,The stock jumped 12.9% in two trading sessions after Hewlett-Packard (HP) announced it would acquire Electronic Data System (EDS).EDS holds 60.9% stake in MphasiS.
The acquisition brings with itself a hope of an open offer for at least 20% by HP.
The Securities and Exchange Board of India’s regulations call for the acquirer (here HP) to make an open offer for at least 20% of the target company’s shares if there is a change in management control.
Importantly, no open offer need be made if the HP-EDS deal is a merger.
In 2002, when HP acquired Compaq Computer Corp, it had also bought out Digital Globalsoft (the majority of which was held by Compaq) and eventually delisted it. The initial floor price was set at Rs 566 per share and the final delisting happened at Rs 850 per share.
The shareholders of MphasiS perhaps expect history to repeat itself.
However, some analysts maintain that if HP has no intention of delisting MphasiS, the open offer would be more or less similar to the average share price in the past six months.
It sure augurs well for MphasiS shareholders that HP does not have any listed subsidiary across the world.
Also, other companies in the space have given good returns to investors at such times. For instance, Flextronics Software Systems (now Aricent) set the floor price at Rs 575 per share and the shares were later de-listed at Rs 725 per share.
A more recent example is that of iGate Global Solutions (IGS), delisted in January this year. Though the floor price for delisting IGS was set at Rs 288.90 per share, the shares were eventually de-listed much higher, at Rs 410 per share.


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