The Hindu : Business : Infosys buys Axon in £407 m deal

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Tuesday, Aug 26, 2008
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Infosys buys Axon in £407 m deal

V. Sridhar

To become a global SAP consulting service provider

Acquisition process to be completed by November
The British company has 2,000 employees

— PHOTO: K. MURALI KUMAR

BRITISH BUY: Kris Gopalakrishnan (centre), CEO, Infosys Technologies, along with V. Balakrishnan (right), CFO, addressing a press conference in Bangalore on Monday. N. R. Narayana Murthy, chief mentor and non-executive chairman, looks on.

BANGALORE: Infosys Technologies on Monday announced its plan to acquire the entire equity base of Axon Group of the U.K. in an all-cash transaction worth 407.1 million pounds (Rs. 3,310 crore).

Addressing the media here, S. Gopalakrishnan, Infosys CEO and Managing Director, said Axon had been valued at six pounds per share, which implied a 33-per cent premium over the average price in the last six months.

The price includes any interim dividend that may be declared when the company’s board meets on Tuesday. The acquisition process is likely to be completed on November.

Founded in 1994, Axon earned revenues amounting to 204.5 million pounds in 2007. About 55 per cent of its revenues come from Europe and it has 2,000 employees. It made a gross profit of 56.3 million pounds in 2007. Its operating margin was 15 per cent in 2007, which is considerably lower than Infosys’.

Mr. Gopalakrishnan said the acquisition would enable Infosys “to become a global SAP consulting service provider.” The company would also have the “global reach to participate in large leveraged deal,” he added.

V. Balakrishnan, Chief Financial Officer, Infosys, said the acquisition made sense because the company had moved into consulting and other “value-added spaces” in the last few years. About 24 per cent of revenues came from consulting and enterprise solutions, he pointed out. Revenues from SAP services had grown by 64 per cent in the last three years. “This (SAP services) is an area where is a lot of demand. There will be plenty of opportunities for growth,” he added.

Mr. Balakrishnan referred to Axon as a “U.K.-centric company, lacking in financial strength and global reach.” He said the acquisition would enable Infosys to deliver from several delivery centres across the world.” He said revenues from Axon would start flowing in only in the fourth quarter of the current year.

Mr. Balakrishnan said the “enterprise solution space has been robust, unaffected by the global economic slowdown.” About 19 per cent of the company’s revenues are from the enterprise solution services, of which, about one-third comes from delivering SAP solutions.

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