Infosys Ltd, India’s second-largest technology firm by revenue, has agreed to acquire US-based digital creative agency Wongdoody for $75.04 million (Rs 490 crore) in cash.
The company also announced the sale of three subsidiaries that were acquired during former chief executive Vishal Sikka’s tenure. These three companies are Kallidus, Skava and Panaya.
Infosys co-founder NR Narayana Murthy had raised question marks over the acquisition of Israeli firm Panaya in the build-up to Sikka's resignation last August.
The IT giant hopes to complete the sale of all three firms by March next year, the Bengaluru-based company informed stock exchanges on Friday after reporting its fourth-quarter earnings.
Infosys’ shares on the Bombay Stock Exchange ended up 0.58% on Friday at Rs 1,169 apiece. The stock has touched a high and low of Rs 1,220 and 861.50 in the past 12 months.
BSE’s benchmark Sensex advanced 0.27% on Friday to end at 34,192.65.
Infosys expects to complete the acquisition of Wongdoody this quarter. Wongdoody is a consultancy firm headquartered in Seattle. Founded in 1993, it operates in the digital strategy, creative and experience design space.
The acquisition does not require any government or regulatory clearance. The all-cash deal also includes conditional deferred consideration and employee retention costs.
“The move (Wongdoody acquisition) strengthens Infosys’ creative, branding and customer experience capabilities,” Infosys said in a statement.
Wongdoody creates fully-integrated campaigns and omni-channel programmes, connects digital experiences to physical in-store experiences, and develops multi-platform content.
GP Bullhound was the exclusive financial advisor to Wongdoody on this transaction.
The deal further strengthens Infosys’ initiative to expand its worldwide and connected network of digital studios.
It also fortifies Infosys’ approach toward inorganic expansion, which appeared rather conservative until its acquisition of subsidiary firms Panaya, Kallidus and Skava.
Panaya, Skava sale
“On conclusion of a strategic review of its portfolio of businesses, the company initiated identification and evaluation of potential buyers for its subsidiaries, Kallidus and Skava (together referred to as "Skava”) and Panaya (collectively referred to as the ‘disposal group’),” read the Infosys statement.
Infosys reclassified and presented assets and liabilities under the firms worth Rs 2,060 crore ($316 million) and Rs 324 crore ($50 million), respectively, in its quarterly earnings.
“On reclassification, an impairment loss of Rs 118 crore ($18 million) in respect of Panaya has been recognized in the consolidated profit and loss for the quarter and year ended March 31, 2018. The corresponding write down in the investment value of Panaya in the standalone financial statements of Infosys Ltd is Rs 589 crore ($90 million),” the company said.
Infosys had announced the acquisition of the Hod HaSharon, Israel-based information technology and cloud-based quality management services firm in February 2015.
The $200 million Panaya deal was Infosys’ second biggest M&A ever, after the firm had bought Lodestone for $350 million in 2013.
The Panaya deal led to allegations that Infosys executives had personally benefitted from it and irked the company’s co-founder Murthy and other promoters.
The allegations drew two internal investigations besides an international probe by law firms between October 2015 and August 2016. None of the investigations found any irregularities, Infosys had said.
However the squabbles escalated, prompting Sikka to resign. from his position in August last year. Former Capgemini executive Salil Parekh took over as CEO in January this year.
The controversy had also resulted in resignations of two other senior Infosys executives, Ritika Suri and Sandeep Dadlani. Suri was Infosys’ large deals head, who had overseen the Panaya acquisition.
Dadlani Infosys’ Americas head and was responsible for at least one-third of Infosys’ business.