Wipro buys Infocrossing for $598 Mn
Tuesday, 07 August 2007, 19:30 IST
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Bangalore: In its largest buyout and the first in the U.S., Wipro Technologies announced it was acquiring Infocrossing, a leading provider of IT infrastructure management, enterprise application and business process outsourcing (BPO) services, for $598.4 million in an all-cash deal. "The acquisition of Infocrossing will be through a tender offer for its 32 million fully diluted shares at the rate of $18.70 per share and the transaction will be completed by December," Wipro vice-president and chief financial officer Suresh Senapaty told reporters at a hurriedly press conference convened after the Indian stock markets closed for trading. The transaction will lead to Infocrossing de-listing its shares from Nasdaq stock exchange. Set up in 1985 and listed in 1992, about 70-80 percent of its shares are held by financial institutions, while the promoters hold 10 percent. Retail investors hold the remaining shares through mutual funds and brokerage firms. The Leonia-headquartered Infocrossing has about 900 employees and posted revenues of $232.4 million in the last fiscal ending March 31, with a net income of $9.3 million. It has five data centres across the U.S. in California, Georgia, Arizona, Nebraska and New Jersey. The book value of its assets is $300 million and its cash reserves are $22.3 million. Though Infocrossing has a debt of $130 million, a substantial portion of this will be converted into equity as part of the deal and the final debt component will be reduced to $55 million. "The acquisition is not only our largest deal till date, but also the first one in the US market, which accounts for over 60 percent of our (flagship) IT division's revenue. The tender price includes 13 percent premium over the average price of its shares traded during the last six months," Senapaty told IANS. Post-acquisition, Infocrossing will be merged with the Indian company's US-based subsidiary Wipro Inc. All its 900 employees will be retained on-site to serve its 190-odd clients spread over the US, Europe and Japan. Infocrossing's domain expertise in hosted and IT infrastructure services will enhance Wipro's similar service offerings. The former's five data centres provide a portfolio of infrastructure management solutions, including server management, mainframe outsourcing, network management and security services. "We have identified global infrastructure services as an important driver of growth. This acquisition will position us as a leader in global remote infrastructure management business, with an opportunity to serve premier global clients," Wipro global IT service-lines president Suresh Vaswani said in a conference call from New Jersey. The global IT infrastructure market has been projected at a whopping $150 billion and the global market opportunity for remote infrastructure management services has been estimated to be about $75 billion by Nasscom, the Indian software services industry body. "Infrastructure management services contributed $250 million to our IT business in the last fiscal (FY 2007), accounting for 11 percent of the total revenue. Going forward, we expect the combined revenue of our IT division and Infocrossing to touch $1 billion in the next 24-36 months," Senapaty maintained. According to Wipro Technologies enterprise solutions president Sudhip Banerjee, the buyout broadens the company's data centre and mainframe capabilities in the remote infrastructure management space. "Through Infocrossing, we are deepening our presence in the US. Its unique platform-based solutions brings in expertise in health plan and payer management segments. It has a proven track record of processing a whopping 175 million claims annually and providing contracted services to 90 managed care organisations," Banerjee pointed out.
Source: IANS