Infosys, India's second largest IT firm has agreed to buy Zurich-based Lodestone Holding AG in a deal valued at 330 million Swiss francs or $350 million (over Rs 1,900 crore). Brokerage major Nomura says the deal indicates an increase in aggression in terms of inorganic growth for Infosys. CLSA said given the continued underperformance, the acquisition was expected and it remains the only route to deliver topline growth.
Here are 10 facts on the Infosys-Loadstone deal.
- Infosys expects the transaction to close by the end of October 2012, subject to customary closing conditions.
- Lodestone advises international companies on strategy and process optimization, and provides business transformation solutions enabled by SAP's enterprise solutions. Lodestone clocked revenues of $210 million in 2011. Of this, 50 per cent was from Switzerland and 23 per cent from Germany.
- Lodestone will add 850 employees to Infosys' 150,000, including 750 consultants experienced in advising clients on the use business management software from SAP AG. It will also increase Infosys' clients to more than 900 from its current 700.
- Post-acquisition, the combined consulting practice focusing on SAP programs will deliver revenues of more than $1 billion. Infosys Consulting & Systems Integration business today has more than 30,000 consultants across 10 industry verticals and accounts for 31 per cent of the company's revenue.
- The Lodestone acquisition will significantly enhance Infosys' global presence, particularly in continental Europe and emerging markets like Latin America and Asia Pacific.
- The acquisition may take Infosys a step closer to its goal of becoming a software-and-services giant providing clients with higher value services and consulting. The company has recently completed implementing Infosys 3.0, a strategy that it expects will take it towards this goal.
- The acquisition is valued at at enterprise value/sales of 1.6-times and will be earnings per share (EPS) accretive in 18 months.
- The deal compares favourable when compared to other similar acquisitions. The HCL-Axon deal was valued at 2.2-times EV/sales, the Wipro-Infocrossing deal was valued at 2.6-times, while the TCS-Citi BPO deal was valued at 1.9-times.
- Linklaters LLP is acting as the legal advisor to Infosys, while UBS AG is acting as financial advisor and Baker & McKenzie acted as legal advisor to Lodestone.
- The stock closed 0.7 per cent higher at Rs 2,512.35 on the NSE.
(With inputs from Thomson Reuters)