Indian Tech Giant Wipro Buying Infocrossing
By HUGH R. MORLEY, STAFF WRITER
Indian computer giant Wipro Technologies on Monday agreed to purchase Leonia-based information technology outsourcing company Infocrossing Inc. for $600 million, the company said Monday.
The companies have signed a “definitive agreement” for a tender offer in which Wipro will pay $18.70 per share about 4.5 percent above the opening price Monday. The proposed purchase is Wipro’s biggest ever and the largest by an Indian technology company, according to data compiled by Bloomberg News.
Infocrossing said the acquisition will enable it to reap the benefits of providing computer services using facilities in less expensive foreign countries. Bangalore-based Wipro, one of the biggest IT outsourcing companies, said the purchase would expand its services and provide a significant U.S. foothold.
“We had an established client base and needed a global delivery platform,” Michael Wilczak, senior vice president for corporate development at Infocrossing, said. “They had the delivery platform but wanted to have the infrastructure capabilities in the U.S. In order to be competitive, we need to have a global delivery capability.”
Infocrossing manages computer systems and does back-office work for corporate customers. The company, which had revenue of $230 million and earnings of $8.5 million in 2006, has 900 employees in five locations across the U.S., including Georgia, Nebraska, Arizona and California.
Wilczak said the company – which has 150 employees in Leonia – does not expect any layoffs as a result of the acquisition. “We have absolutely no plans to close any of our facilities,” he said.
Infocrossing shares increased 42 cents, or 2.4 percent, to $18.15. The stock has risen 11 percent this year after climbing 89 percent in 2006.
The deal, which is subject to regulatory approval, is expected to close by the end of 2007, the companies said in a release.
David Gold, an analyst who covers Infocrossing for New York- based Sidoti & Co., said the deal looks beneficial to both parties.
“It seems like there is a good opportunity for both to cross- sell,” he said.
Wipro Technologies is the global IT services business of Wipro Ltd., one of the three largest Indian “offshore outsourcing” companies, which have grown rapidly in the last decade by enabling American companies to cut computer costs and other expenses. A similar business model has fueled the growth of Teaneck-based Cognizant Technology Solutions Corp., which has several Indian development centers.
Wilczak said the acquisition arose as his company, which is entirely based in the U.S., was assessing how to take reap the benefits of doing work offshore.
“It’s something we had looked at doing on our own,” he said. “But this is a much better opportunity. … We can provide greater services and a seamless transition.”
Suresh Vaswani, president of Wipro’s global IT service-lines division, said in a release that the acquisition of Infocrossing would broaden his company’s data-center and mainframe capabilities as well as deepen the company’s presence in the U.S.
Infocrossing, founded in 1984, went public in 1993 and has grown through acquisitions.
Among them was the purchase of (i)Structure, a Colorado company that manages computer systems, for $81.5 million in 2005.
Infocrossing also bought Verizon’s IT health-care processing business for $35 million in 2004 and the same year acquired ITO Acquisition Corp., an Orange County, Calif., data-center company for $36.5 million.
Infocrossing’s 200 clients include ADT, Sprint PCS, Sunoco and Reader’s Digest. The company has strategic alliances with IBM, Computer Associates, Sun Microsystems, Intel and Cisco Systems.
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