Metavante buy: No open offer for Firstsource yet

Fidelity National Information Services (FIS), which is acquiring NYSE-listed Metavante Technologies for around $3 billion, has said it will not take any decision on making an open offer to the shareholders of Firstsource till the third quarter of 2009, when the transaction is completed.

FIS may have to go for an open offer as Metavante owns around 20 per cent stake in the Mumbai-based business process outsourcing (BPO) firm and the acquisition tanatamounts to an indirect entry into Firstsource.

“As of now, there will be no change in the strategy of Metavante as we continue to operate as two independent firms at this point in time. The transaction should get completed by the third quarter of 2009,” said Raja Gopalakrishnan, senior vice-president, global solutions, and managing director, India.

A senior executive of Firstsource said, “It is still early to comment on the situation or how it will impact Firstsource. We still need some time to understand the implications.”

Analysts, however, opine that an open offer may not be required. “When HP acquired EDS, which holds close to 60 per cent stake in Mphasis, it did not go for an open offer. Besides, the management of Metavante is still a part of the acquisition and will be with FIS,” said a research analyst tracking the firm.

“Metavante was to be an exclusive go-to-market partner of Firstsource in the US market. The NYSE-listed firm was to recommend its US clients to Firstsource and both these firms were to work jointly on a technology platform. While Metavante did get Firstsource some clients, the platform approach to serve clients could not be worked out due to the current slowdown. With this acquisition, either FIS can take the relationship forward or take its own route and just stay invested,” said another analyst.

Meanwhile, FIS’ acquisition of Metavante will also mean a rise in the ability to increase its services and product portfolio in India. “Metavante does not have much of a presence in India. Now, with them, it gives us a bigger canvas to play on,” said Gopalakrishnan.

The companies anticipate $260 million (around Rs 1,300 crore) in cost synergies and increased long-term revenue growth. FIS may also look at options like offshoring and outsourcing to achieve cost synergies. “There are four areas for cost saving that include infrastructure consolidation, product portfolio rationalisation, redundant overhead function, and supplier rationalisation. As a part of reducing redundancies we will evaluate process improvement, re-engineering, outsourcing and offshoring,” said Gopalakrishnan.