IT software and services provider 3i Infotech on Tuesday said it has acquired Regulus Group, a US-based payment and document processing company, for nearly $100 million, in a move that would increase the Indian company’s overseas presence, besides increasing its revenue. The cost of the acquisition is approximately $80 million, with an additional $20 million based on earn-outs linked to its performance in the next two years.
The acquisition is an all-cash deal, funded by debts raised on Regulus and guaranteed by 3i Infotech, to be serviced over a period of seven years, the company said. The company plans to close the deal within three months. “We expect revenue from Regulus to start accruing to us by the end of second quarter this year,” 3i Infotech managing director and CEO V Srinivasan told ET. Regulus had reported $148 million in revenue for the year-ended December, 2007.
Commenting on the synergies behind the buyout, Mr Srinivasan said: “This acquisition would help us increase our footprint in the payment processing industry both in the US and in emerging markets like India and China. It also allows us with cross-selling opportunities to Regulus’ BFSI (banking financial services and insurance) clientele.” Currently, the BFSI space accounts for 48% of Regulus’ total clients. 3i Infotech currently earns $130-140 million in revenue from its US businesses, said 3i Infotech CFO Amar Chintopanth. The company said it would retain the 1,300 employees of Regulus, but is also planning to offshore services like data entry and technology development to 3i Infotech’s India operations. “We are hoping that the volumes from the US business would grow exponentially in the coming 2-3 years and thus the need to retain Regulus’ employees,” Mr Srinivasan said.
However, post the acquisition, the US company’s present CEO Richard Long would step down and the company’s president and current COO would take over as the CEO of the company. Moreover, 3i Infotech is also looking to spend nearly $60 million on further acquisitions in the BFSI space. “We have spent nearly $40 million on acquisitions and other growth plans further to which we still have some balance left from the FCCB issue last year, from that kitty we would look at more $5-6 million sized deals in the BFSI space to build on the service offerings we have had so far,” Mr Srinivasan said.
The company had raised nearly $100 million though an FCCB issue June last year. 3i Infotech last week said its net profit last year grew 75% to Rs 183 crore. The company’s stock rose 10% post the announcement on Tuesday to close at Rs 131.75 on the BSE.
Source: Economic Times