The Hindu Business Line : Open offer hopes lift MphasiS

Bangalore, May 13 Shares of MphasiS Ltd, an EDS company, rose 9.88 per cent on Tuesday on reports that Hewlett-Packard Co is in talks to buy IT outsourcing company Electronic Data Systems Corp (EDS) for about $13 billion.

MphasiS shares gained Rs 21.80 to close at Rs 242.45 on Tuesday at the BSE after touching an intraday high of Rs 256. Shares of MphasiS surged on hopes of an open offer that may follow a likely change in management control at the parent level.

Promoters’ holding

EDS is holding 21.13 per cent stake in MphasiS, while about 40 per cent is being held by TH Holdings, taking the total foreign promoters’ holding to 60.9 per cent.

Mr Vikas Jadhav, Senior Analyst, Motilal Oswal, told Business Line that one would have to wait and see how things are going to shape, but at present, it seems this deal should be good for MphasiS. The valuation of the deal is fair, he added.

He said the acquisition would be a good fit because HP is strong in technology services and consulting, while EDS is strong in IT services, infrastructure management and applications.

Mr Jadhav said HP lacks significant offshore presence. This acquisition would help to fill this gap. MphasiS has about 28,000 employees. It has global delivery centres in India, China, South America and Europe.

Mr Jadhav also said EDS is strong in the US in the Government and the defence sectors. HP would benefit from this as well, if the deal goes through, he said.

HP has about 1,22,000 employees globally, while EDS has about 1,40,000, Mr Jadhav said.

For the fourth quarter of fiscal 2008, MphasiS posted net profit of Rs 71 crore, compared with Rs 66 crore in the year ago-period. Revenue increased 31 per cent to Rs 658 crore.

HP and EDS said they have signed a deal under which HP would buy EDS for about $13.9 billion. An EDS spokesperson said that it is expected to take several months to complete this transaction, and it is too early to speculate about any direct impact such an event might have on EDS subsidiaries.

The EDS stock on the NYSE was trading 1.28 per cent higher at $24.44 at 7.30 pm IST.

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