Oracle acquires i-flex for $909m

Open offer at Rs 882.6 per share.

Oracle announced it would buy a majority stake in India's largest applications software company i-flex solutions in a $909-million (around Rs 3,960 crore at an exchange rate of Rs 43.55 to a dollar) deal.

The global technology major will acquire Citigroup Venture Capital International's 41 per cent ownership stake in i-flex solutions for a consideration of $593 million (Rs 2,583 crore).

This will be followed by a 20 per cent open-offer for public shareholding, which can cost $316 million (offer price of Rs 882.62 per share), if the offer is fully subscribed.

The open-offer price is at a 6 per cent premium to the 30-day average price and at a 24 per cent premium to the 90-day average price. Subject to regulatory approvals, the transaction is expected to close by the end of 2005.

Today, the stock closed at Rs 896.15 on the Bombay Stock Exchange.Oracle President Charles Phillips said there were no plans to de-list the company from the Indian bourses. The stock will continue to be traded at both the BSE and the NSE.

Business Standard had reported on July 25 that Oracle was in talks with the Citigroup to buy out i-flex solutions. i-flex has a combination of products and services business with products contributing about 54 per cent to sales.

In 2004-2005, the company posted revenues of Rs 1,140 crore and earnings before interest depreciation and tax of Rs 277 crore. Net profit stood at Rs 203 crore.

"Banking is a strategic industry for Oracle with nine out of the top 10 banks already running Oracle ERP applications. i-flex gets us there in banking," said Oracle CEO Larry Ellison.

Software products from i-flex support corporate banking, consumer banking, investment banking, Internet banking, asset management, and investor services.

The i-flex stock today gained 8.24 per cent or Rs 68.20 on BSE to close at Rs 896.15.

i-flex currently provides software and services to 575 banks in 115 countries. The company's portfolio of software products includes Flexcube, the world's top-selling core banking solution, Reveleus, an advanced business analytic application and Daybreak, an enterprise consumer-lending suite.

The current i-flex management team will remain, even after the acquisition. i-flex will align product development, sales, marketing, and services activities with Oracle. i-flex applications have been optimised for Oracle's technology platform since 1997, with over 90 per cent of i-flex customers currently running Oracle technology.

i-flex's relationship with Citigroup, its main customer, will remain intact.

In the last financial year, the company derived 65 per cent of its revenues from the Citigroup. "i-flex product Flexicube is replacing the legacy system at various Citigroup locations. This relationship should continue," said Phillips, who will join the i-flex board.

"The inevitable transition from legacy systems to modern applications has created a multi-billion dollar opportunity, and because no single supplier has been able to meet customer needs, the banking software market is highly fragmented. Customers have been looking for a tier 1 software partner to help modernise their systems and lower their maintenance costs," he added.

SYNERGY

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• Oracle to acquire Citigroup Venture Capital's 41% stake in i-flex for $593 m
• Oracle's President Charles Phillips will join i-flex board
• i-flex stock will continue to trade on BSE and NSE
• Open offer is expected to close by the end of 2005