The Hindu Business Line : Mastek buys US-based Systems Task for Rs 116 cr

On buying-spree
For acquiring STG, MajescoMastek will pay $25 million upfront
The acquisition will be funded through internal accruals and bank borrowings
Post-acquisition, STG will be re-branded as STGMastek

Our Bureau

Mumbai, March 10 IT solutions vendor Mastek Ltd has acquired Systems Task Group (STG) International – a provider of enterprise solutions for the property and casualty (P&C) insurance industry – in an all-cash consideration of $29 million (Rs 116 crore).

The buy-out will enable Mastek, which has a strong presence in the life and annuity segment of the insurance business, to gain a foothold in the P&C insurance space, Mr R.S. Desikan, Group Chief Financial Officer, told Business Line.

Headquartered in New York with an offshore competency centre in Mumbai, STG has about 350 employees. It services over 35 small and mid-sized American insurance carriers.

As per Celent Research, IT spending by P&C insurers is expected to cross $20 billion by 2010 from $16 billion in 2007. Post-acquisition, STG will be re-branded as STGMastek.

For acquiring STG, MajescoMastek (the North American unit of Mastek) will pay $25 million upfront, while the remaining amount would be linked to ongoing performance and paid by way of earn-outs over the next two years, added Mr Desikan.

Mr William McCarter, President of MajescoMastek, will take over as the President of STGMastek.

The acquisition will be funded through internal accruals and bank borrowings. STG’s contribution would be reflected in Mastek’s consolidated performance partly in fiscal 2007-08 and fully in fiscal 2008-09, a news release from the company said.

For the financial year ended December 31, 2007, STG reported an EBITDA of $1.73 million on revenues of $17 million.

The STG management team, including its founder Mr Praful Nikam, will continue to be actively involved in the STG Mastek’s operations, the news release added.

The Mastek scrip was down by 0.33 per cent to close at Rs 260 on a volatile Bombay Stock Exchange.

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