IDG News Service (Bangalore Bureau) — Indian outsourcer Wipro plans to acquire U.S. IT services provider Infocrossing for about US$600 million, to fill gaps in its portfolio in hosted and managed IT infrastructure services and network operations centers.
Wipro of Bangalore announced Monday that the companies have signed an agreement for Wipro to acquire Infocrossing for US$18.70 per share in an all-cash deal.
Infocrossing of New Jersey has 32 million outstanding shares, Wipro Chief Financial Officer Suresh Senapaty told reporters in Bangalore on Monday. Wipro will acquire all of the outstanding shares of Infocrossing followed by the merger of the company with a Wipro subsidiary in the United States, he added. The tender offer for the shares is expected to close by the fourth quarter of this year, Wipro said.
Besides five data centers in the United States, and expertise in mainframes, Infocrossing will bring to Wipro its IT services and business process outsourcing (BPO) in health care, Senapaty said. Wipro plans to sell services delivered from India in infrastructure management, BPO and other areas to Infocrossing's clients, which number about 190, Senapaty said.
Wipro has already made eight IT acquisitions in the past 24 months, primarily to gain access to new markets in Europe and the United States. But the company typically paid about $50 million for each of those acquisitions.
A pure offshore vendor will no longer do, and Indian outsourcers need a global footprint, said Siddharth Pai, a partner at outsourcing consultancy firm Technology Partners International (TPI) in Houston. Wipro has made the right move to acquire Infocrossing, he added.
Indian outsourcers have been setting up operations closer to their customers in the United States and Europe, as some customers are increasingly demanding that offshore outsourcers also have a local presence.
Having data centers and other operations in the United States, after the acquisition of Infocrossing, will increase customer comfort levels in dealing with Wipro on large remote infrastructure management contracts, said Sudip Banerjee, president for enterprise solutions, in the Wipro Technologies business of Wipro.
Infocrossing had revenue of $229 million and profit of $8.5 million last year. Its margins are currently lower than those of Wipro, but the company plans to boost margins at Infocrossing through a number of measures, including better utilization of its data centers, which currently run at 50 percent capacity utilization.
Infocrossing's 900 staff will be absorbed into Wipro after the merger is complete.
