The Largest IT Deal Yet: Wipro Acquires Infocrossing For $600 Million
Tue, 08/07/2007 - 16:55 — Sahad P V
As rumoured earlier, Wipro Technologies, the global IT services business of Wipro Ltd, has acquired Infocrossing, Inc., a Nasdaq-listed IT infrastructure management company for $600 million in an all cash deal. Wipro will pay $18.70 a share, which is about 13 per cent premium over the six month average of Infocrossing's share price.
The deal, the largest by Wipro and the largest overseas acquisition by an Indian IT company yet (see the table, right), is expected to close by the fourth quarter of 2007. It also needs regulatory approvals. The deal is also significant since it's the first acquisition by Wipro of a listed company abroad, which shows that Indian companies are getting better at wading through the complex regulatory hurdles and disclosure norms. Infocrossing had revenues of $232.4 million and net income of $9.3 million for the year ending March 31, 2007.
The company provides integrated managed infrastructure services to global clients. The acquisition will give Wipro Technologies a strong presence in the remote infrastructure management space, by adding five data center locations and about 900 employees in the US, according to Sudip Banerjee, President, Enterprise Solutions of Wipro Technologies. Infocrossing also brings in expertise in health plan and payer management segments. The company has processed over 175 million claims annually and also provides contracted services to over 90 managed care organisations.
The operating margins of Infocrossing is only in the range of 10-14 per cent as against Wipro's 25 per cent. Apparently, the margin differences will be mitigated in the next 2-3 years, according to company officials. The current global IT infrastructure market is estimated to be around $150 billion, of which the remote infrastructure management services (that can be offshored) will be worth $70 billion, according to NASSCOM.
Wipro was advised on the transaction by Citigroup and represented by the law firm of Wilson Sonsini Goodrich and Rosati, while Infocrossing was advised by Credit Suisse Securities (US) and represented by the law firm Gibson, Dunn & Crutcher.
Prior to this, the largest acquisitions in Indian IT sector were made by Bangalore-based telecom software solutions company Subex Systems (now Subex Azure). In January 2007, Subex bought Canada's Syndesis for $164.5 million, and in April 2006, it bought UK's Azure for $140 million.
Related:
Wipro Closes In On $500-Million Buy Of Nasdaq-listed Infocrossing; Plus Wipro's Past 10 Deals
