SSI-Albion, the costliest merger
SSI Technologies has been one of the fast growing companies in India. The company has followed the growth strategy of mergers and acquisitions. SSI has undertaken many acquisitions and recently, the company has created history by its biggest deal with Albion Arion, a US based company for $65 million. Is this biggest deal across the border justified for the company?
SSI, which operates under three businesses - SSI Education, SSI Enterprise Support and SSI Technologies was started as an education company and was third best institute after NIIT and Aptech. In 1999, the company entered IT development and had clinched a big deal by acquiring Indigo Technologies through which it got access to Nasdaq. The company went ahead and acquired 3rd Agenda and Inndsoft in the same year.
3rd Agenda has customers like Citibank, GE Capital, Satyam Infoway, Ogilvy and Mather, Maruti Countrywide, Alacrity and Fuller. The company has worked on the online ticketing site for the Gold Flake Open in 1998 besides being involved with www.carstreet.com. Its portfolio includes solutions for corporate intranets and extranet deployments. 3rd Agenda helps SSI implement its Web strategy in its education and software development businesses.
SSI has products like TESA and SecuraTRADE, the kind of software typically used in stock exchanges for real time online transactions. The product line provides an electronic securities market environment based on proven Nasdaq market structures. IndigoMarkets will provide services through distributed and Internet technologies available from partners including Microsoft, Compaq, Cisco Systems and MCI WorldCom.
SSI, with its latest acquisition of Albion Orion, a US based company for $ 65 million, which has been the costliest acquisition, proposes to use a combination of cash and stock to pay off the deal. SSI would pay $20 million in cash and issue about 6.5 million GDS's (each GDS being equivalent to 0.1 share). At the SEBI preferential price of around Rs. 3,070 per share, the issue of GDS's would amount to $43.65 million.
Albion Orion has operations in Atlanta, Minneapolis and Chicago and provides IT solutions in internet/e-business technologies and supply Chain management, CRM and ERP systems. The company's strong clientele includes Bell South, Common Wealth of Massachusetts, Atlantic Mutual, Liberty Mutual, Bayer, 3M, American Express, Daimler Chrysler etc. Moreover it has 35% in Albion Connect, a product company that offers a full suite of operational support systems, telecommunication products. Albion Orion immediately adds over Rs.120 crore to the topline of SSI.
Thus this acquisition is a perfect fit with SSI. It complements SSI Technologies' business model with strong domain skills in telecom, healthcare and insurance with over 100 clients and provides a platform for the company to effortlessly move up the value chain by enhancing delivery capabilities in high-end IT solutions.
It is advantageous to Albion also. Albion does not have any off shore centre. The operating expenses of the company are around $115 per man hour. Now with the SSI unit in India, they can bring the projects to this centre and can do it for just $25 per man hour and could make a margin of 75$.
So with the acquisition of the US based company Albion Arion, though at a high price, it would definitely be an advantage to SSI and as well to the US company. SSI, which is listed on London Stock Exchange and is awaiting a move for listing on Nasdaq has become easier to access the US bourses. This would also boost the other Indian companies to acquire foreign companies and become an Indian MNC.
K Venu Babu
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