WESTBOROUGH, Mass.--(BUSINESS WIRE)--Virtusa Corporation (NASDAQ GS: VRTU), a global business consulting and IT outsourcing company that accelerates business outcomes for its clients, today announced that it has entered into an Investment Agreement under which The Orogen Group purchased shares of the Company’s newly issued Convertible Preferred Stock, initially convertible into 3,000,000 shares of common stock, for an aggregate purchase price of $108 million. In connection with the investment, Vikram Pandit has been appointed to Virtusa’s Board of Directors. Orogen is a new operating company that was created by Vikram Pandit and Atairos Group, Inc., an independent private company focused on supporting growth-oriented businesses, to leverage the opportunities created by the evolution of the financial services landscape and to identify and invest in financial services companies and related businesses with proven business models.
Kris Canekeratne, Chairman and Chief Executive Officer of Virtusa, stated, “We are delighted to welcome Vikram Pandit to our Board of Directors and Orogen as a long-term investor and strategic partner. Orogen’s extensive industry experience and network in banking, financial services and insurance (“BFSI”) and media will be tremendous assets to Virtusa as we execute our industry-leading growth plan. Additionally, Vikram is an exemplary leader and his extensive experience and knowledge in banking and financial services will help us strengthen our solutions and services and capitalize on current and new client opportunities. We look forward to leveraging Vikram’s deep domain expertise as we execute our strategic plan, especially as it relates to new digital business models and the dislocation taking place in financial services. We believe that this partnership will position Virtusa to continue to be a leading force in our industry.”
Vikram Pandit, Chairman and Chief Executive Officer of Orogen, stated, “The financial services industry is going through a transformation, driven by new technologies, data-driven solutions, changing customer demands, and new market entrants in the fintech space. Virtusa is at the nexus of this change. With its deep domain expertise and breadth of solutions focused on delivering digital transformation and operational excellence to clients, Virtusa plays a pivotal role in the industry’s transformation and is well positioned to gain share in the market. We are excited to partner with Virtusa to help augment its long-term growth potential.”
Mr. Pandit is a 35-year veteran of the financial services industry. He began his career in financial services at Morgan Stanley in 1983 and ultimately became President and Chief Operating Officer of the company's institutional securities and investment banking businesses. Mr. Pandit left Morgan Stanley to become a founding member and chairman of the members committee of Old Lane, LP. Citigroup acquired Old Lane in July 2007, and Mr. Pandit was appointed CEO of Citigroup in December 2007. He led Citigroup during one of the most challenging economic and financial crises in history, successfully recapitalizing and restructuring the company and returning it to profitability before leaving in October 2012. Mr. Pandit is a member of the Board of Directors of Bombardier Inc. and is a member of the Board of Overseers of Columbia Business School.
Virtusa intends to use the proceeds from the sale of its Convertible Preferred Stock to repay approximately $81 million of its senior term loan, as well as for common stock repurchases and general corporate purposes. Virtusa’s Board has approved the repurchase of approximately $30 million of common stock.
Convertible Preferred Stock Terms
Under the terms of the investment, Orogen purchased 108,000 shares of Convertible Preferred Stock, initially convertible into 3,000,000 shares of common stock, for an aggregate purchase price of $108 million, with an initial conversion price of $36.00. The convertible preferred shares have a 3.875% dividend per annum, payable quarterly in additional shares of common stock and/or cash at Virtusa’s option. The convertible preferred stock matures on May 3, 2024. The shares purchased consist of voting convertible preferred stock and a separate class of non-voting convertible preferred stock, the latter of which will automatically convert into shares of voting convertible preferred stock on a one-to-one basis upon the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. Additional information regarding the investment will be included in a Form 8-K to be filed today by the Company with the Securities and Exchange Commission. Virtusa will provide additional information on its next earnings call, scheduled for May 16, 2017.
Ranjan Kalia, Chief Financial Officer of Virtusa, said, “We believe Orogen’s investment is a strong vote of confidence in our business model and growth potential. It will enable us to strengthen our balance sheet by reducing our outstanding term loan and return capital to our shareholders via our stock buyback. We currently expect the net impact of the convertible preferred shares and associated debt reduction will be dilutive to both GAAP and non-GAAP EPS in fiscal 2018, which we anticipate will be partially offset by our share buyback program.”
J.P. Morgan acted as financial advisor to Virtusa. Goodwin Procter, LLP acted as legal advisor to Virtusa. Citigroup acted as financial advisor to Orogen and Davis Polk & Wardwell LLP acted as legal advisor to Orogen.
Share Repurchase Plan
Virtusa’s Board of Directors has authorized a share repurchase program of up to $30 million of Virtusa’s common stock over the next twelve months. The Company will fund share repurchases with the proceeds of the Orogen investment and cash on hand. Share repurchases under the program may be made through open market purchases or privately negotiated transactions in accordance with applicable federal securities laws, including Rule 10b-18 of the Exchange Act of 1934. While the Board of Directors has approved the share repurchase plan, the timing of repurchases and the exact number of shares of common stock to be purchased will be determined by Virtusa management, at its discretion, and will depend upon market conditions and other factors.
About Virtusa
Virtusa Corporation (NASDAQ GS: VRTU) is a global provider of information technology (IT) consulting and outsourcing services that accelerate business outcomes for Global 2000 companies and leading software vendors in banking and financial services, insurance, healthcare, telecommunications, technology, and media & entertainment.
