Blackstone in deal to buy HPE stake in Mphasis for US$825m

[SAN FRANCISCO] Hewlett Packard Enterprise said it will sell its majority stake in Mphasis Ltd for about US$825 million to Blackstone Group LP.

The private equity firm will acquire at least 84 per cent of HPE's stake for 430 rupees per share, the US company said in a statement on Sunday. The remaining 16 per cent stake will be bought via a mandatory tender offer, HPE said.

Chief executive officer Meg Whitman is looking for new ways to help bring more focus to her company after a historic split of HP in November, separating the company that targets corporations with servers, storage and services from the business that provides printers and personal computers.

The sale of the roughly 60 per cent stake in Mphasis could help provide fresh cash to fuel more buybacks, according to a note by Rajesh Ghai, an analyst at Macquarie Group Ltd. last month.

HPE said its decision to sell its Mphasis stake "aligns with its current capital allocation priorities." Still, the deal won't have any impact on HPE's commercial agreement with Mphasis, which was renewed for another five years as part of the deal, it said.

HP has been a key customer for Mphasis, providing 24 per cent of sales in the quarter ended Dec 31. While significant, that's down from 35 per cent in the year-ago period.

The transaction, which is expected to close in the second half of fiscal 2016, won't impact HPE's targets for an operating margin of 6 per cent to 76 per cent for the year, the company said. In 2015, HPE recognized US$75 million in pretax profit from its stake in Mphasis, it said.

BLOOMBERG