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Chennai/Bangalore Aug. 26 Infosys has agreed to buy out Axon Global Plc of the UK before calendar 2008 is over. But, as in all international acquisition attempts, what if another company is willing to better Infosys’ offer of 600 pence per Axon share?

Should Axon shareholders vote in favour of another buyer and that deal be completed before January 31, 2009, Axon would pay Infosys an inducement fee of one per cent of the consideration payable by Infosys for the Axon shares, the two companies have said in a statement, put up at the Indian major’s Web site.

This fee would amount to approximately Rs 33 crore, given Rs 3,310 crore as the size of the acquisition.

However, Infosys has said it expects to complete the deal with Axon in November 2008.

Asked if Infosys is competing with any other company for Axon, Infosys CFO, Mr V. Balakrishnan said, “We had made an offer and it is public. We are not aware of anybody else competing for Axon at this point in time.”

Currently, Infosys has irrevocable undertakings from Axon’s key shareholders to vote in favour of Infosys’ proposal, in respect of about 11.65 million shares representing about 18.1 per cent of the shareholding.

Three key promoters of Axon, Mr Mark Hunter, Mr Donald Kirkwood and Mr Paul Manweiler, hold stakes totaling about 17.9 per cent of the above.

Axon’s annual report for calendar 2007 shows at least nine institutional shareholders whose individual stakes exceed 3 per cent and whose cumulative holding touches 42.3 per cent of the shareholding.

Axon also announced today a 28 per cent rise in half-year revenues to £123.9 million (£96.7 million) for the period ended June 2008, while operating profit rose 19 per cent to £16.5 million pounds (£13.8 million) for the same period.

Since both Infosys and Axon compete in similar geographies and service offerings, overlap of operations is unavoidable. Asked if that was a cause for concern, Mr Balakrishnan told Business Line, “The client list is more complementary. We have very few clients which are common and that’s a great opportunity to cross-sell."

Significantly, the India story seems to be forcing consolidation among niche or smaller players even internationally. In its announcement, Axon has said that competition from large global IT service providers and the uncertainty in the macroeconomic environment were among the reasons that prompted Axon to be acquired by Infosys.

It added that the emergence of overseas new entrants, in recent years, with significant ‘structural’ advantages has posed an increasing competitive threat to European and US service providers. In other words, offshoring capability is a differentiator.

More Stories on : Software | Mergers & Acquisitions | Overseas Investments | Infosys Technologies Ltd

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