MUMBAI: Canada’s Ontario Teachers’ Pension Plan (OTPP) and Canada Pension Plan Investment Board (CPPIB) are competing with bulge-bracket private equity funds such as Blackstone, Bain Capital, and CVC Capital Partners to acquire a significant minority stake in leading big data analytics firm Mu Sigma at a $1.1-1.2 billion valuation.
US-based software and analytics giant Palantir Technologies is also in negotiations to acquire the shares held by General Atlantic and Mu Sigma CEO Ambiga Subramanian, multiple sources close to the deal told ET. General Atlantic and Subramanian together own around 46 per cent in Mu Sigma and have been looking to monetize this, mandating Credit Suisse and Citigroup to help them find a buyer. But Subramanian may keep a part of her stake, said executives aware of the negotiations.
Subramanian and founder Dhiraj Rajaram, who each hold a 24 percent stake in the company, made public their divorce in May. At the time Rajaram had told ET that Subramanian may give up her executive role going forward.
Even though only about 30-35 percent of the company is said to be up for grabs, Palantir and the PE buyout funds are keen on a controlling stake, being wary of negative news flow regarding the company in recent times, said the people cited above.
Rajaram is keen to buy Subramanian’s holding along with that of General Atlantic and has been on the lookout for financing. He has, however, valued the company at $800 million, said the people cited above.
Initial bids submitted
Suitors submitted initial bids last week, they said. The company denied any plans to this effect. “Mu Sigma would like to maintain that the points raised in the mail are untrue,” a company spokesperson said in response to ET’s detailed questionnaire.
Blackstone, Bain Capital, and CPPIB declined to comment, while General Atlantic, OTPP, CVC Capital Partners and Palantir did not respond to emails. Subramanian did not respond to calls or text messages.
Founded in 2004, Mu Sigma is headquartered in Chicago and has substantial operations in Bengaluru. The company, which counts Microsoft, Walmart and Dell among its clients, has raised close to $200 million through three rounds of private equity investments since 2011. It currently employs 4,000 people.
In April 2011, Sequoia Capital invested $25 million in Mu Sigma, while in December 2011, it raised $108 million from General Atlantic. In 2013, Mu Sigma raised about $45 million in a round led by Master-Card with investors including Fidelity While Rajaram and Subramanian hold 24 per cent each, General Atlantic, Fidelity Investments, MasterCard and Sequoia Capital hold the rest. General Atlantic, among the biggest investors in the company, may also not sell its entire holding, one of the sources said.
“Sequoia, Fidelity, and MasterCard are expected to continue their shares in the company unless a compelling offer comes from the strategic or financial investors,” the source said.
Industry in flux
The big data industry globally is seen to be in flux with leader Palantir reportedly having lost key clients like Coca-Cola and American Express in recent quarters. This, in turn, may also affect the valuation of Mu Sigma. Moreover, any new investor would be wary of recent developments, including the Rajaram-Subramaniam split and exits of some senior executives.
Ganesh Lakshminarayanan quit in last July after being the managing director of Mu Sigma for a year. He was running the Indian operations. Atul Bansal quit as chief financial officer in March 2015.
Investor Patrick Ryan sued the company earlier this year, accusing Rajaram of misleading him into selling shares back to the promoters. He alleged that Rajaram put pressure on him and bought the stock at an artificially lowered price.
Interestingly, this will be the first time that pension funds such as OTPP and CPPIB are bidding for an IT services firm in India. “Mu Sigma can be a stable and long-term investment for them and will fit into their strategy,” one of the sources close to the pension funds told ET.
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