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Sri Lankan-founded Virtusa acquired by Hong Kong-based investor
Sri Lankan-founded Virtusa Corporation, based in the US which sprang a surprise this week announcing a takeover by a Hong Kong-based investor, is likely to see the exit of founder-chairman Krish Canekeratne and his wife, Thushara from the company’s list of shareholders.
In Colombo, senior management attached to the company’s development centre, declined to comment on the transaction which was announced in a joint statement by Virtusa, a global IT services company, and new investor, Baring Private Equity Asia. Whether Mr. Canekeratne remains as CEO of the company is also so far unclear.
The announcement made in the US on Thursday said that Baring is to acquire Virtusa for US$51.35 per share in an All-Cash Transaction valued at $2 billion. The transaction is expected to be closed in the first half of 2021.
“Since it’s an all-cash transaction where all shareholders have been bought over, I think Krish and other shareholders will exit the company while it was also likely to be delisted from the US stock exchange (Nasdaq),” one fintech industry analyst said in Colombo, adding that its development centres in Colombo and in Hyderabad, Chennai and Bangalore in India are likely to continue under the new management.
The company has 22,830 employees in offices throughout the US and Europe, and technology centres in Sri Lanka and India. Mr. Canekeratne and his wife, Tushara, founded the company in 1996 in their US residence, and first ran it out of his parents’ home in Colombo, Sri Lanka, according to a foreign newspaper report.
As of May 22, 2020, there were approximately 30,132,817 shares of the company’s common stock outstanding held by approximately 27 stockholders. Sri Lanka’s Keith Modder, Chief Operating Officer and Managing Director, Europe, Middle East and AsiaPac, is also believed to have shares in the company while the Colombo development centre comes under the purview of Madu Ratnayake, Executive Vice President/CIO and GM.
Virtusa’s annual meeting has been fixed for October 2. In an August 25,2020 letter to shareholders, the company said a recent investor, US-based New Mountain Capital, is trying to force its way into the boardroom with misinformation, after reneging on their prior settlement offer. “We urge you to reject this strong-arm tactic, which jeopardizes the progress that has been made at Virtusa, which we believe is poised to deliver significant value for our shareholders,” the letter said. However no reference was made in that letter to any offer by Baring Private Equity Asia which, less than a month later, had clinched a deal to take over Virtusa.
While revenue for the year 2019/2020 (end March) rose to US$1.3 billion from $1.2 billion in the previous year, company gross profit fell to $353 million from $363 million in 2018/19.
In a statement Mr. Canekeratne, Chairman and CEO of Virtusa, said, “This transaction represents a strategic evolution for Virtusa and a unique opportunity to take our business to new heights at a time of accelerating digital adoption. The benefits of this transaction extend to all Virtusa stakeholders, including our shareholders, who will receive immediate and substantial cash value, as well as to our team members ….”
| Founder of Virtusa | |
 Krish Canekeratne Born in Colombo in 1965, Krish Canekeratne attendedColombo International School. He went on to attend Syracuse University in the US. After studying computer science and mathematics at Syracuse University and graduating in 1988, Mr. Canekeratne worked at Independent Election Corporation of America, a subsidiary of Automatic Data Processing (ADP) for one year prior to founding INSCI Corporation, a supplier of digital document repositories and integrated output management products and services, in 1989. In 1996, Mr. Canekeratne co-founded Virtusa, launching operations out of the basement of his home outside Boston. In 1997, Mr. Canekeratne co-founded eDocs, a provider of electronic account management and customer care, which was developed out of Virtusa. In late 2004, Siebel Systems, now part of Oracle Corporation, acquired eDocs for $115 million. After experiencing a compounded annual revenue growth of 50 per cent over a five-year period ending March 31, 2007, and employing more than 3,500 employees worldwide, Virtusa completed its initial public offering in 2007. It was the first U.S. firm run by a Sri Lankan national to list on NASDAQ.
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