VanceInfo (VIT), hiSoft (HSFT) Enter $875M Merger Agreement

August 10, 2012 6:49 AM EDT
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VanceInfo Technologies Inc. (NYSE: VIT)) and hiSoft Technology International Limited (Nasdaq: HSFT) have signed a definitive merger agreement, under which the companies will be combined in a tax-free, all-stock merger of equals with a combined equity value of approximately US$875 million. Under the terms of the agreement, VanceInfo and hiSoft shareholders will each own approximately 50% of the combined company. hiSoft will be the surviving listed company in the merger, and its shares will continue to be listed on the NASDAQ Global Select Market. A new name for the combined company will be announced in due course.

Under the agreement, each outstanding ordinary share of VanceInfo will be exchanged for the right to receive one common share of hiSoft, and each American Depositary Share of VanceInfo ("VanceInfo ADS"), each of which represents one VanceInfo ordinary share, will be exchanged for the right to receive one American Depositary Share of hiSoft ("hiSoft ADS"). Immediately prior to the merger, hiSoft will effect a 13.9482-to-1 share consolidation and change the ratio of hiSoft ADSs representing ordinary shares from one ADS for 19 shares to one ADS for one share, which effectively implies in a 1-to-1.3622 hiSoft ADS split. These changes are designed to ensure that hiSoft and VanceInfo will have the same number of outstanding shares and ADSs at the effective time of the merger.

The combined company will employ over 23,000 people across 13 locations in China and 14 additional locations worldwide. It will serve a global base of top tier customers, which include some of the largest Chinese corporations as well as many Fortune 500 companies. Its vertical areas of strength will include TMT, BFSI, Transport and Manufacturing.

The companies have identified potential cost synergies, which are expected to reach 2% of combined revenues within 18 months after the closing of the transaction. The parties are developing a defined execution plan and anticipate that the transaction will be accretive within the first 12 months following the consummation of the merger.

The strategic combination has been approved by both companies' boards of directors and is subject to customary closing conditions, including shareholder approvals by VanceInfo and hiSoft shareholders. The transaction is expected to close in the fourth quarter of 2012.

CitigroupGlobal Markets Inc. acted as financial advisor and Orrick, Herrington & Sutcliffe LLP acted as legal counsel to VanceInfo in connection with this transaction. Lazard acted as financial advisor and Simpson Thacher & Bartlett acted as legal counsel to hiSoft in connection with the transaction.

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