Infosys to buy Lodestone for $350M

Cash rich IT giant Infosys is acquiring Zurich-based Lodestone Holding AG for $350 million (CHF 330 million), making its biggest acquisition yet. The all cash deal will help India's second largest software services exporter beef up its capabilities in SAP domain.

Infosys largest deal was when it bought back Citi Venture Capital's stake in Infosys BPO for $115 million in 2006. In 2007 it bought Royal Philips Electronics NV's global finance and accounts BPO for $28 million and most recently bought software solutions business of Gen-i, the ICT arm of Telecom New Zealand.

Infosys has not been as aggressive in terms of acquisitions unlike its peers Tata Consultancy Services and Wipro. The company has been looking at deploying its cash pile, which is estimated at nearly $4-billion, though has been trigger shy. It recently walked from a reported half-a-billion deal for Belgian payment solutions firm Clear2Pay and in 2008 from UK-based Axon Group, where HCL Technologies came in later with a $658 million bid.

Lodestone advises international companies on strategy and process optimisation, and provides business transformation solutions enabled by SAP. "Upon completion, the acquisition of Lodestone will strengthen Infosys Consulting and Systems Integration (C&SI) capabilities, by bringing more than 850 employees, including 750 experienced SAP consultants to the company," according to a statement.

Lodestone will add more than 200 clients across industries like manufacturing, automotive and life sciences. Post-acquisition, the combined consulting practice focusing on SAP programs will deliver revenues of more than $1 billion for Infosys.

Infosys Consulting & Systems Integration business, today, has more than 30,000 consultants across 10 industry verticals and accounts for 31 per cent of the Infosys' revenue. The Lodestone deal will give it presence in continental Europe and emerging markets like Latin America and Asia Pacific.

“A key plank of our Infosys 3.0 strategy is to expand our Consulting & Systems Integration business. This acquisition fits perfectly into that strategy," said S. D. Shibulal, CEO & Managing Director, Infosys.

The transaction is expected to close by the end of October. Linklaters LLP is acting as legal advisor to Infosys. UBS AG is acting as financial advisor and Baker & McKenzie is acting as legal advisor to Lodestone.

(Edited by Prem Udayabhanu)

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