INDIA BUSINESS WORLD - JULY - AUGUST - 2007
The Month that was ...

WIPRO BUYS OUT US IT SERVICES CO FOR $600M, MARKING THE LARGEST ACQUISITION IN INDIAN IT SPACE

THERE'S no stopping Wipro's acquisition juggernaut. The software behemoth unveiled its biggest buyout till date, and the largest for the Indian IT industry. Wipro Technologies has signed a definitive agreement to acquire the Nasdaq-listed Infocrossing for $18.70 per share, pegging the enterprise valuation of the IT infrastructure management services firm at $600 million, including $60-million debt, in an all-cash deal.

This marks Wipro's 12th acquisition in the IT space and the ninth in the last 24 months alone, in what is being famously tagged as "string of pearls" strategy. The entire process of acquiring Infocrossing is likely to close by December, and the acquired entity will be merged with Wipro's subsidiary in the US-Wipro Inc. This buyout brings in revenues of $232.4 million with 900 people spread across five locations in the US. Wipro, for the first time, is in the process of acquiring a publicly-held company. "This acquisition is a perfect fit for our technology infrastructure services (TOS), and gives us an undisputed lead in remote infrastructure management services," said Wipro CFO Suresh Senapaty.

The current global IT infrastructure market is estimated to be around $150 billion, and around $70 billion is projected as offshorable. However, the operating margins of Infocrossing, which range between 10-14%, do not exactly match up to the Wipro Technologies' margin of around 25%. But Mr. Senapaty said there are lot of synergies between the companies, and the margin difference will be mitigated in the next 2-3 years.

It may be mentioned that Infocrossing reported a net of $8.5 million on a top line of around $230 million in 2006. The price being paid by Wipro is a 13% premium over the six-month average of Infocrossing's stock value.