The Hindu Business Line : Wipro buying Infocrossing of US for Rs 2,430 cr

In the largest-ever overseas acquisition by an Indian IT firm, Wipro Technologies has signed a definitive agreement to buy-out the Nasdaq-listed Infocrossing Inc in an all-cash deal exceeding $600 million (approx. Rs 2,430 crore).

The New Jersey headquartered Infocrossing is a US-based provider of IT infrastructure management, enterprise applications and business process outsourcing services. For 12-month ended March 2007, Infocrossing had revenues of $232.4 million with a net income of $9.3 million and $22.3 million cash on balance sheet.

Announcing the buy-out, Mr Suresh Senapaty, Chief Financial Officer, Wipro Ltd, said the company will be paying $18.70 per share, a 13 per cent premium to the six-month average price of Infocrossing share.

Wipro down

Following the buy-out news, Infocrossing shares were up 2.5 per cent in the morning trade on Nasdaq at $18.17, over the previous close of $17.73. However, Wipro shares on NYSE were trading lower by 2 per cent at $13.67 over previous close. Also, Wipro shares on the BSE ended lower 2.6 per cent at Rs 457.85 on Monday.

Wipro will come out with a tender offer over the next few days to acquire all outstanding shares (32 million) followed by the merger of Infocrossing with Wipro Inc, the US subsidiary of Wipro.

As per information on Nasdaq, institutional investors own 88 per cent of Infocrossing’s stock, while the management owns a minor stake. Infocrossing provides portfolio of infrastructure management solutions, including server management, mainframe outsourcing, network management and security services.

Plugging gaps

The deal is likely to be closed by December 2007 and revenues from the combined operations are expected to flow from the January-March quarter, said Mr K.R. Lakshminarayana, CFO, IT business, Wipro Technologies.

Apart from helping Wipro to plug the strategic gaps in data centre, main frame and managed services, “Infocrossing will enhance our hit rate of winning large outsourcing deals,” Mr Senapaty said. “Through Infocrossing, we are deepening our presence in the US with the addition to five data centre locations and about 900 employees.”

Wipro’s Total Infrastructure Solutions practice, which clocked revenues of $250 million last year, had a year-on-year growth of 75 per cent. With the acquisition in place, the combined infrastructure business of Wipro is targeting a billion dollar revenue in 24-36 months, Mr Lakshminarayana said.

Enhancing client base

Infocrossing brings about 200 clients to Wipro fold, thus enhancing its total client base while providing an opportunity to cross-sell its other services. Infocrossing had an operating margin of 10-12 per cent, much lower than that of Wipro Technologies’, which is at 24 per cent.

“There will be some dilution on margins and we expect to normalise them over three to four year period,” Mr Lakshminarayana said.

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