IT major Infosys to acquire UK's Axon

Bangalore, Aug 26: Infosys Technologies Ltd, one of the leading Indian technology services provider, on Monday, Aug 25 said it has agreed to buy Axon Group PLC, a British consulting firm, for about $753 million. Axon specialises in implementation of SAP AG's enterprise software. It has about 2,000 employees and offices in Britain, North America, Malaysia and Australia.

This is the first takeover in Europe by Infosys and is the latest sign that increasingly confident and cash-rich Indian companies are spreading their wings.

Infosys CEO S Gopalakrishnan said to the media that Axon, a listed company on the London Stock Exchange, had reported a profit after taxation of 37.4 million Dollars and a revenue of 378.3 million Dollars last year. Infosys had offered to acquire 100 per cent stakes at a price of six Pounds per share through a cash deal. This is the largest ever acquisition deal struck by the city-based IT major.

Axon is the leading SAP consulting company with 2000 plus employees serving clients in over 30 countries. Based in London, Axon had a PAT margin of 9.5 per cent. "The acquisition will help us to enhance our growth in SAP space globally," he said.

The CEO said Infosys was offering a 33.1 per cent premium to the Axon share when compared to six months average share price of 4.51 Pounds and 19.4 per cent premium to the closing price of 5.025 pound on 22 august 2008, the last business day prior to announcement.

Mr Gopalakrishnan said that the transaction of the acquisition of the Axon was expected to be completed by November this year as the deal had to get the approval from the shareholders of Axon and two court hearings to complete the process. Stating that the objective of the acquisition was to position Infosys as a global SAP consulting service provider and to cross sell service to other clients, he said there was an increasing global demand of SAP business.

The acquisition would also help Infosys leverage the domain capabilities across a range of industry verticals and enhance its high growth opportunities supported by continued global demand for SAP.

Infosys CFO V Balakrishnan, who also spoke on the occasion, said the UK centric SAP consulting company had a global presence, servicing clients in 30 countries and had reported revenue CAGR 42.7 per cent and PAT growth 68.2 per cent.

Outlining the vertical presence of Axon, he said it earned revenue of 68 per cent from Solutions implementation, 12 per cent from Application management, 20 per cent from Business consulting. It generated a revenue of 61 per cent from Europe, 34 per cent from North America and 5 per cent in Asia Pacific.

Strongly defending the acquisition price of six pounds per share, Mr Balakrishnan said, "We believe that it was a fair price." Replying to questions that the SAP space was one of the fastest growing business and offered lot of opportunities, he said, "We have seen lot of demand for SAP." With the acquisition the UK centric firm Axon, Infosys would get the necessary financial strength and global reach. Infosys would buy 100 per cent stake and had spoken to Axon's board and its key founders before acquisition, he said.

The CFO also said that the acquisition would not affect Infosys' future guidance as the deal was expected to completed by November. The acquisition would be finalised as per a scheme or arrangement as sanctioned by a court.

In 2002, there were only three takeovers of foreign competitors by Indian companies. This rose to 15 by 2004. Three years ago, Apeejay Surrendra, whose interests range from tea and retailing to property and finance, bought Typhoo for £80 million. Tata, the conglomerate, followed up the acquisition of Corus Steel in 2006 with the £1.1 billion takeover of Land Rover this year. Experts believe that the pace of Indian acquisitions will only gather momentum.

OneIndia News