Wipro to acquire US services provider Infocrossing

Indian outsourcer to pay $600 million to provide better hosted and managed IT infrastructure services

Indian outsourcer Wipro plans to acquire U.S. IT services provider Infocrossing for about $600 million, to fill gaps in its portfolio in hosted and managed IT infrastructure services and network operations centers.

Wipro of Bangalore announced Monday that the companies have signed an agreement for Wipro to acquire Infocrossing for $18.70 per share in an all-cash deal.

Infocrossing of New Jersey has 32 million outstanding shares, Wipro Chief Financial Officer Suresh Senapaty told reporters in Bangalore on Monday. Wipro will acquire all of the outstanding shares of Infocrossing followed by the merger of the company with a Wipro subsidiary in the U.S., he added. The tender offer for the shares is expected to close by the fourth quarter of this year, Wipro said.

Besides five data centers in the U.S., and expertise in mainframes, Infocrossing will bring to Wipro its IT services and BPO (business process outsourcing) in health care, Senapaty said. Wipro plans to sell services delivered from India in infrastructure management, BPO and other areas to Infocrossing's clients, which number about 190, Senapaty said.

Wipro has already made eight IT acquisitions in the last 24 months, primarily to gain access to new markets in Europe and the U.S. But the company typically paid about $50 million for each of those acquisitions.

A pure offshore vendor will no longer do, and Indian outsourcers need a global footprint, said Siddharth Pai, a partner at outsourcing consultancy firm Technology Partners International Inc. (TPI) in Houston. Wipro has made the right move to acquire Infocrossing, he added.

Indian outsourcers have been setting up operations closer to their customers in the U.S. and Europe, as some customers are increasingly demanding that offshore outsourcers also have a local presence.

Having data centers and other operations in the U.S., after the acquisition of Infocrossing, will increase customer comfort levels in dealing with Wipro on large remote infrastructure management contracts, said Sudip Banerjee, president for enterprise solutions, in the Wipro Technologies business of Wipro.

Infocrossing had revenue of $229 million and profit of $8.5 million last year. Its margins are currently lower than those of Wipro, but the company plans to boost margins at Infocrossing through a number of measures, including better utilization of its data centers, which currently run at 50 percent capacity utilization.

Infocrossing's about 900 staff will be absorbed into Wipro after the merger is complete.

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