Red Hat Ireland to aquire 40% in Indian concern

Open source major Red Hat Ireland is planning to acquire 40 per cent of the total equity in its sister concern, Red Hat India for which the latter has sought Foreign Investment Promotion Board's (FIPB) approval.

Red Hat India is seeking to transfer around 28 lakh shares of its total 70 lakh shares to Red Hat Ireland. Red Hat India would use the amount for expansion in the country.

However, the deal size could not be ascertained as Red Hat India was a closely held one.

According to sources in the industry the stake sale would be of a "substantial" amount as the consideration "will be much greater than the fair market value of the equity shares proposed to be acquired".

Red Hat India and Red Hat Ireland are the subsidiaries of the global Linux major, Red Hat Inc, a Nasdaq-listed company. Red Hat Inc is a provider of Linux and open source technology, and is regarded as one among the world's best 20 companies.

"Red Hat Ireland proposes to acquire all equity shares held by the sellers through itself and its nominee. The company does not have any collaboration or tie-up, whether equity or otherwise, in the field in which the company is engaged in India. The sellers also wish to withdraw their investments from the company and transfer their equity shares in favour of RH Ireland and its nominees," Red Hat India said in a filing with FIPB, a copy of which is available with Business Standard.

It also states that this was the acquisition was approved by its board on December 23, 2005. On completion of the acquisition, Red Hat India will become a wholly-owned subsidiary of Red Hat Ireland.

The authorised share capital of the company was Rs 1.50 crore as on the date of incorporation on July 5, 2000, and it had a paid-up capital of Rs 69.82 lakh. Red Hat Ireland holds the majority of the stake of 60 per cent in the Indian company, with 4,18,950 shares (valued at Rs 41.89 lakh).

Indian partner Clover Technologies Ltd holds 15.65 per cent or 1,09,300 shares (Rs 10.93 lakh), while individuals Azim Faizullah Hasanah Tapia has 12.18 per cent or 85,015 shares (Rs 8.50 lakh) and Javed Faizullah Tapia 12.17 per cent or 85,010 shares (Rs 8.50 lakh).

Confirming this, Red Hat India President (Indian Continent and Middle East) Javed Tapia said, "the acquisition will result in an increased inflow of foreign exchange and direct investments in form of working capital, capital expenditure, human capital and development of intellectual property to the Indian subsidiary".

Red Hat wishes to expand its operations in the country and provide employment, apart from making "substantial investments" depending on the market conditions in the country.

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BLUEPRINT

The company wants to transfer 28 lakh shares of 70 lakh shares to RH Ireland

On completion of the deal, RH India will be a wholly-owned subsidiary of Red Hat Ireland

The deal size could not be ascertained as Red Hat India is a closely held firm