Move follows British Telecom’s acquisition of Frontline Technologies
Accel Frontline is 42 per cent owned by Frontline Technologies.
Concurrently FTC is buying 9 per cent stake in Indian promoter Accel Ltd.
Experts say this indirect acquisition may trigger open offer.
Chennai, Dec. 5 Accel Frontline Ltd will soon become a subsidiary of British Telecom. The Chennai-based IT company is 42 per cent owned by Frontline Technologies Corporation (FTC) of Singapore, 30 per cent by the Indian promoter Accel Ltd, and by Indian public.
Today, it was announced in the Singapore stock exchange that British Telecom, through BT Singapore Pte Ltd, would buy out FTC. Concurrently, FTC is also buying 9 per cent in Accel Frontline from the Indian promoter. When these two transactions are complete, Accel Frontline will be 51 per cent owned by the $18-billion British Telecom.
The Rs 185-crore Accel Frontline provides a range of IT services, including infrastructure management, ERP consulting, banking solutions and networking. It also runs a BPO. The company expects a turnover of Rs 270 crore in the current year.
This is then a case of ‘indirect acquisition’ of an Indian company through an overseas transaction. Normally, this would trigger an ‘open offer’ to the public, experts say.
(A recent example is that of Sparsh BPO Services. IGSPL, a joint venture of HDFC and Barclays Bank, had a 51 per cent stake in Sparsh. When HDFC and Barclays Bank sold their stakes in IGSPL to SKR BPO, the transaction triggered an open offer.)
Experts note that this is a clear case of change in ownership and BT will have to come out with an open offer, though it could seek an exemption if it is able to provide grounds for that.
On the NSE, Accel Frontline’s shares closed at Rs 111.65, higher by Rs 10.15 (10 per cent) over the previous close.
Asked for a comment on the development, Mr N.R. Panicker, Managing Director and CEO of Accel Frontline, who owns Accel Ltd, said: “this development will bring excellent business opportunities to Accel Frontline. This is the biggest milestone in the (16-year) history of the company and will bring benefits to all stakeholders.”
He said that the development could conceivably bring business opportunities through British Telecom.
Asked why Accel Ltd was selling 9 per cent to Frontline, Mr Panicker said: “This is a friendly gesture. Frontline has been our partners and anyway they had the majority stakes. When they said there was a need for them to make Accel Frontline their subsidiary, we agreed.”
He agreed when it was pointed to him that the remaining 21 per cent would be more valuable after the company becomes a British Telecom subsidiary, than it is now.
Incidentally, as Business Line had reported on November 12, Mega Resources Ltd, which belongs to the Kolkata-based jute baron, Mr Arun Bajoria, had picked up 10 per cent stake in Accel Frontline, from the market in the last few months.
Now, the question is whether or not BT would want to de-list Accel Frontline. The promoters hold 72 per cent and Mega Resources another 10 per cent. Only 18 per cent is with the public. If BT wants to de-list, it would need the co-operation of Mega Resources for getting the 20 per cent from non-promoter holding.
Our Delhi Bureau reports:
Mr François Barrault, CEO-BT Global Services, said: “This acquisition will create one of the leading providers of networked IT solutions that will be able to offer a broader portfolio of solutions to local, regional and global customers. Frontline will bring to BT major new contracts in Asia and BT will be in a position to offer Frontline customers the full suite of BT products and services. Through this acquisition, we reinforce our ability to provide high quality services to our customers wherever they do business.”
The Frontline Executive Chairman and Founder, Mr Steve Ting, said: “Becoming part of BT can only accelerate our future growth and help to create a unique portfolio offering that will benefit our existing and future customers, firmly establishing us as one of the leaders in our space. This proposed transaction is great news for our customers, shareholders and employees.”