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Basics of the IGATE–Capgemini Transaction

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Basics of the transaction

The IGATE–Capgemini merger is a friendly cash merger that will require an IGATE shareholder vote. Note that there’s a deal with the three biggest shareholders who control 54% of the vote. There’s a 30-day fiduciary-out period before shareholders are required to give their consent. During that time, the company can cooperate with another potential suitor if the board of directors believes in good faith that there could be a superior bid.

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Terms of the transaction

With the Capgemini–IGATE (IGTE) merger transaction, IGATE shareholders will receive $80 per share once the deal closes. The companies are guiding for a second-half of 2015 close, although they expect the regulatory approvals to be in place by the end of August.

Conditions precedent

The following conditions need to be satisfied in order for the deal to close:

  • IGTE shareholder vote
  • Hart-Scott-Rodino antitrust filing
  • any other government approvals
  • Committee for Foreign Investment in the United States
  • U.S. Securities and Exchange Commission approval of the proxy
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Breakup fee

In the event another bidder comes in and tops the Capgemini bid, IGATE will owe a breakup fee of $161 million.

Financing

Capgemini warrants that it will have the funds prior to closing. It will use cash on hand, an equity offering—particulars to be determined—and then issue straight debt for the remaining portion. It’s not subject to financing.

Merger arbitrage resources

Other important merger spreads include the deal between Baker Hughes (BHI) and Halliburton (HAL) or the merger between Pharmacyclics (PCYC) and AbbVie (ABBV). For a primer on risk arbitrage investing, read Merger arbitrage must-knows: A key guide for investors.

Investors interested in trading in the tech sector should look at the Sector SPDR Trust SBI Interest (XLK).

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