Infosys to buy Lodestone for $349 mln

BANGALORE Mon Sep 10, 2012 3:46pm IST

1 of 2. An employees walks past a signage board in the Infosys campus at the Electronics City IT district in Bangalore, February 28, 2012.

Credit: Reuters/Vivek Prakash/Files

Related Topics

Stocks

   

BANGALORE (Reuters) - Infosys Ltd(INFY.NS) has agreed to buy Lodestone Holding AG in a deal valued at 330 million Swiss francs, as India's No. 2 software services exporter strives to boost income from higher value services and accelerate growth.

The acquisition of Lodestone, a Zurich-based management consultancy firm that advises clients on strategy and on business management software from SAP (SAPG.DE), will add more than 200 clients to Infosys' 711 customers at the end of June.

Investors have criticised Infosys for its aversion to acquisitions despite holding nearly $4 billion in cash, and its inability to make progress in consulting to compete with rivals IBM (IBM.N) and Accenture (ACN.N).

The $7 billion company, which symbolises India's rise as an outsourcing powerhouse, has struggled this year. It has missed its sales targets, lost market share to local rivals, put off an annual pay rise and seen its stock battered.

Infosys Chief Executive S.D. Shibulal said the acquisition was part of the company's new strategy, under which it will focus more on higher-margin software and consulting and less on basic outsourcing services.

The acquisition will also boost Infosys' presence in Europe, its second-largest market after the United States, he said.

Infosys plans to conclude the all-cash deal by October, the Bangalore-based company said, adding it was not changing its annual revenue guidance for the current fiscal year to March 2013 as a result of the acquisition.

Shares in Infosys, which the market values at $25.5 billion, rose as much as 1.2 percent during the day. It was trading up 0.2 percent at 0859 GMT. Some analysts said that the immediate financial impact of the acquisition was likely to be limited.

UNUSED CASH BALANCE

The deal values Lodestone, whose top clients include German carmaker BMW (BMWG.DE) and drugmaker Roche Holding AG (ROG.VX), at 1.3 times its revenue of 250 million Swiss francs expected in 2012, Infosys Chief Financial Officer V. Balakrishnan said.

Excluding the Lodestone deal, the total value of Infosys' completed M&A transactions is about $398 million, compared to more than $1 billion for bigger rival Tata Consultancy Services (TCS.NS), according to Thomson Reuters data.

In 2008, Infosys announced a $700 million-plus bid for British consulting firm Axon, but dropped out of the race after smaller domestic rival HCL Technologies (HCLT.NS) made a higher offer.

"We have lot of appetite for buying companies which will fit our strategic needs," CFO Balakrishnan said. "It's not just acquisition, internally there are a lot of steps that we will take to achieve high-quality revenue growth in the near future."

UBS (UBSN.VX) advised Lodestone on the deal.

(Writing by Sumeet Chatterjee; Editing by Daniel Magnowski)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (1)
SachiNewDelhi wrote:
250,000 employees needed to create a market cap of $25 billion and turnover of $7 billion.

How does that compare with others such as Apple, Facebook, Google, Intel, Microsoft?

http://explainingindia.blogspot.in/

Twitter: @sachi_bbsr

Sep 10, 2012 6:36pm IST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

School Shooting

School Shooting

Two killed, four wounded in Washington state school shooting.  Full Article 

Sundar Pichai Elevated

Sundar Pichai Elevated

Google's Pichai to oversee major products and services.  Full Article 

Need For Reforms

Need For Reforms

Euro zone risks "relapse into recession" without structural reforms - Draghi.  Full Article 

Diwali Sales

Diwali Sales

Gold sales jump about 20 pct for Diwali - trade body  Full Article 

World Bank Rival

World Bank Rival

Three major nations absent as China launches W.Bank rival in Asia  Full Article 

Wal-Mart India

Wal-Mart India

Murali Lanka appointed as Wal-Mart India operations chief  Full Article 

Health Of Lenders

Health Of Lenders

25 European banks set to fail health checks - sources.  Full Article 

Special Report

Special Report

Why Madrid's poor fear Goldman Sachs and Blackstone  Full Article 

India Insight

India Insight

Kalki Koechlin on her role as a disabled girl in “Margarita, With a Straw”  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage