Aegis, the business process outsourcing arm of the Essar Group, is in advanced talks to acquire India-listed Avaya GlobalConnect (AGC) Networks.
Aegis, according to sources familiar with the development, is expected to pay Rs 230-235 per share to acquire the 59.13 per cent promoter’s stake in the company. Avaya Inc, the US-based business communication systems provider, owns this stake in Avaya GlobalConnect through Avaya Mauritius (33.63 per cent) and Avaya International LLC (25.50 per cent).
At this rate, the value of the deal for a total of 8.4 million shares would amount to around Rs 200 crore. The market seems to have got a whiff of the deal as the AGC stock price went up sharply to touch a 52-week high of Rs 310.30 on May 12. The stock price has corrected since and it closed at Rs 272.95 on May 14, down 3.26 per cent on the Bombay Stock Exchange (BSE). This implies Aegis will get the promoter’s stake at a discount of around 13 per cent.
If successful Aegis will have to go for an open offer.
“Since it’s a listed firm, the promoter’s stake can be acquired from the open market, either through a bulk or block deal. But following that, it will have to come up with an open offer,” said a banker on condition of anonymity.
An Aegis spokesperson said: “As a group, we continue to explore growth opportunities in the areas we are present in. However, we cannot comment on any specifics.” Responding to an email sent to Avaya Inc, a spokesperson stated: “It is our policy not to comment on market rumour or speculation.”
Aegis, one may recall, was planning an initial public offering (IPO) this year. This acquisition, if it fructifies, will allow Aegis to strengthen the growth of its subsidiary Aegis Tech. In June 2009, Aegis had announced its foray into the infrastructure management space by setting up an independent subsidiary. The company had then said that it plans to invest $100 million in this venture over the next 12 months and would touch revenue of $100 million in the next 18 months.
| ON A BUYING SPREE Recent acquisitions by Aegis | ||
| Companies | Amount | Year |
| Ismart Timex | Undisclosed sum | 2009 |
| CCN group | $50 million | 2009 |
| PeopleSupport | $250 million | 2008 |
| AOL Call Centre (India) | Undisclosed sum | 2008 |
| Teletech Services | $13 million | 2007 |
| Global Vantedge | Rs 100 crore | 2007 |
Inorganic growth option is not new to Aegis. It has acquired about 13 firms in the last three to four years. The company has stated in the past that its target has been to make four acquisitions a year. The last acquisition that the company announced was of 80 per cent stake in Ismart Timex, a leading BPO firm from Sri Lanka for an undisclosed amount.
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AGC Networks (earlier known as Avaya GlobalConnect Ltd) has also undergone several changes in the last one year. The company rebranded itself as AGC Networks. Till a year back, the company was the sole subsidiary of Avaya Inc. But it also started working with other partners like Polycom, Extreme Networks and others. “If Aegis succeeds in pulling this off, it will allow the company to be a niche player in the growing unified communications (UC) segment,” said Alok Shende, Principal Analyst, Ascentius Consulting.
Aegis has around 39,000 employees while AGC Networks has over 500 employees and over 30 offices spread across the country. It has an extensive distribution network comprising over 50 systems integrators, channel partners and dealers. With over 6,000 customers, it provides service support through the remote maintenance integration (RMI) system
AGC Networks clocked revenue of Rs 515 crore for FY09. For the quarter ended March 2010, the company reported a net profit of Rs 9.3 crore. Revenue for the quarter touched Rs 138.48 crore. AGC Networks’ present market capitalisation stands at Rs 388 crore.