MindTree, which has bought four companies in the last eight years, will acquire 32.57 per cent stake in Aztecsoft from e4e Holdings, Mauritius, in an all cash deal for around Rs 117 crore.
According to Sebi regulations, MindTree will make an open offer for 20 per cent additional Aztecsoft stake by August after which the merger process will begin. The company expects to complete the merger in 6-12 months.
The acquisition of the cumulative 52.57 per cent stake in Aztecsoft will cost MindTree about Rs 190 crore, which the company will fund through internal accruals.
"MindTree has a cash reserve of Rs 200 crore. To acquire the remaining stake, the company may borrow from the market," MindTree Chief Financial Officer Rostow Ravanan said.
Aztecsoft, which reported revenues of $62 million in FY08, will join MindTree with a team of more than 2,100 people, a cash reserve of $18 million, and over 60 active clients.
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"Aztecsoft is truly aligned with MindTree's values, culture and high standards of corporate governance. We believe that the transaction will be beneficial for customers, people and shareholders of both organisations," MindTree Chairman and Managing Director Ashok Soota said.
About 80 per cent of Aztecsoft revenues, which offers outsourced product development (OPD) and testing services, come from the US. The merger with MindTree, which is quite strong in Europe and Asia Pacific region, will provide the company with an edge to establish base in those geographies.
After the merger, MindTree will become a $250 million entity with a headcount of approximately 7,800 people. The entity will have a unique customer base of about 260.
The acquisition of Aztecsoft will also give MindTree better access to the $6.1-billion global independent testing market, which is growing at a CAGR of 40 per cent.
At present, testing practices contribute just 6.3 per cent (about $12 million) to MindTree's annual revenues, whereas Aztecsoft gets 40 per cent of its revenues from testing. The combined testing team will have about 1,900 people.
The combined entity will also become one of the top-15 IT services firms in India with centres in Bangalore, Chennai, Hyderabad, Pune and Bhubaneswar.
Aztecsoft CEO Samir Bodas said: "For over a decade, Aztecsoft has established itself as a differentiated leader in the OPD and testing space. With MindTree, we will further extend this leadership and be able to offer our customers newer services and solutions."
MindTree made its first acquisition in 2004, when it acquired ASAP Solutions, based in Noida. In 2005, MindTree bought Bangalore-based Linc Software Services for approximately $7 million. During December last year, MindTree made its third acquisition by acquiring Purple Vision for $6.5 million.
While Yes Bank handled the deal for the seller (e4e), Morgan Stanley and Amarchand & Mangaldas managed the deal for MindTree.