Infosys' Blockbuster Buy

The biggest acquisition in the history of Indian IT services has taken place and is expected to be completed fully by the month of November. Indian IT services giant and one of the market leaders Infosys has announced that it will be acquiring the UK based Axon group. Particulars include Infosys going in for the buy with an aggressive all-cash buyout. They will be paying around 600 pence per share which is almost 100 pence more than Axon’s current market value as of today.

This amounts to a total of almost Seven Hundred and Fifty Five Million Dollars.

For Infosys to make a major decision like this and buy a very strong company like Axon in the current economic situation is a bold and confident move. Therefore expect heightened investor confidence in the company and notable trading in the stock over a short term period.

The single most important reason for Infosys’ acquisition of Axon is their lack of presence in Europe. While Infosys has a sizeable presence in Asia and the Americas. They lose a considerable amount of business in Europe. This is an area their rival; the Tata group led TCS have taken advantage of. Buying Axon will definitely cut down TCS’s lead over Infosys not only in Europe but all round.

Axon in themselves function mainly in Europe and provide IT services to every sector possible government and private. They design applications for industries, retail chains, automotive and aeronautical sectors among others. Infosys will be eager to take advantage of this expanded bouquet of services.

Over time Axon have also managed to enter into strategic partnerships with Australian and South American companies. As a result of this Infosys will also be able to expand businesses in places like Australia, New Zealand and Puerto Rico.There are also a number of Asian companies that avail of Axon’s services all of which will be taken over by Infosys.

The only possible hindrance to this deal might come from shareholders themselves. Axon is a company with around 72 % of its stock floated on the markets. The remaining 18% lies in the hands of the founders and company executives and employees. It is therefore up to them and Infosys to buyout the remaining shares from the other shareholders.

Infosys have announced that they plan to de-list the company once it comes under their control. There is the possibility that Infosys might go in with an open offer headed by Axon to buyback these shares.However,even though cumbersome that is a matter of detail but still a tricky one.

For Infosys the buy of Axon is money well spent. Not only does it give them a sizeable presence over Europe and the prospect of increasing revenues by using their services wing over sectors consolidated by Axon but also that Axon is a Zero debt company. They have no major current liabilities which mean that Infosys does not need to worry about debt.

In fact Axon brought in revenue of 200+ million pounds and a profit of 20+ million pounds last year alone. Most certainly a good deal and a smart one for Infosys, another feather in its cap.