Infosys pays Rs 3,300 cr for UK's Axon

All-cash deal major boost to Infosys Consulting.

Infosys Technologies today said it will acquire UK-based and London Stock Exchange-listed Axon Group, a SAP consulting company, in an all-cash deal worth around Rs 3,300 crore ($753.1 million).

This is the third inorganic growth initiative taken by India’s second largest provider of information technology services in over three decades. The company had idle cash of slightly over Rs 7,500 crore on its books as on June 30, 2008.

The acquisition is the largest overseas acquisition by an Indian IT company till date. It surpasses Wipro Technologies’ Rs 2,400-crore acquisition of US-based InfoCrossing last year.   

The acquisition is expected to enhance Infosys’ consulting capabilities and improve its access to the boardrooms of large global organisations to advise them on transformational changes.

Infosys Consulting, ever since it was set up around four years ago, has been on investment mode and is consequently in the red. Last year, it was rumoured to be in talks to buy a controlling stake in European technology consultancy major Capgemini. Both companies had vehemently scotched the rumours.

Axon employs 2,000 employees and will add Rs 1,660 crore to Infosys’ annual revenue and around Rs 160 crore to its net profit. The company has cash reserves of about Rs 205 crore and services over 200 clients including big names like BP, Xerox and PSL Energy.
 

LARGE IT M&AS
Acquirer	Target	Size
Infosys Technologies	Axon Group	$753 mn
Wipro	Infocrossing	$600mn
Firstsource	MedAssist	$330 mn
WNS	Aviva BPO	$228 mn (+$1 billion outsourcing deal for 8 yrs)
Blackstone	Intelenet	$200 mn
Infosys	Philips BPO Captive  (F&A BPO)	$28 mn
Note: $10 million = around Rs 43.50 crore

It derives close to 55 per cent of its revenue from Europe and about 40 per cent from the US. The company also has a delivery centre in Malaysia with over 700 people.

Kris Gopalakrishnan, the CEO and managing director of Infosys, told newspersons: “We are excited about this acquisition. The strategic combination of our groups will accelerate the realisation of our common aspiration — that of being the most respected provider of business transformational services in the global marketplace.”

Infosys employs close to 2,100 consultants for its SAP practice, which contributes about a third of its enterprise solutions revenue (about 10 per cent of Infosys’ global revenue comes from enterprise solutions). Infosys has over 100 clients in the SAP space spread over 20 countries.

According to the Infosys management, the three founders of Axon along with some employees hold around 18 per cent in the company and they have recommended the deal to the other shareholders.

“We are offering 6 pence a share, which is a premium of more than 30 per cent over the average of last six months’ price,” said Gopalakrishnan, hopeful that the shareholders will take up the offer.

Infosys will go in for a ‘scheme arrangement’ to acquire the target company, which means that Axon will now issue notice to all its shareholders for a general meeting. If the shareholders give their nod, there will be two court hearings in the UK. If approved, Infosys will acquire 100 per cent in Axon and the company will be delisted from LSE.

The whole process will be completed by January next year and the complete integration will happen in the fourth quarter, said V Balakrishnan, the CFO of Infosys Technologies.

He said the integration of the company would not be an issue for Infosys. “We started a consulting practice almost three-and-a-half years ago and we integrated it very well. So we know how to handle it,” he added.

Infosys’ first overseas acquisition was of Expert Information Technologies in Australia for close to $23 million during 2003. In 2007, the company acquired Philips’ global BPO operations in a deal which will yield around $250 million revenues to Infosys over a period of time.