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HCL Technologies
HCL Technologies Limited (HCL) is an Indian provider of Information technology (IT) services and consulting company headquartered in Noida, Uttar Pradesh, India.
HCL Enterprise was founded in 1976 and is one of India's original IT garage start ups. HCL Technologies formed in 1991 when HCL's R&D business was spun off and to focus on the growing IT services industry. During last 20 years, HCL has expanded its service portfolio in IT applications (custom applications for industry solutions and package implementation), IT infrastructure management, and business process outsourcing, while maintaining and extending in product engineering.
Contd.
In August 2008 Infosys Technologies offered 407m to acquire the business. This offer was subsequently beaten by a rival offer for 441m by HCL Technologies. The acquisition by HCL was completed in December 2008.
The combined strengths of HCL and Axon provide a number of potential benefits and opportunities: Axon has a high performance and employee-centric culture that fits in well with HCLs Employee First philosophy
Axons process consulting and implementation capabilities complements HCLs application and infrastructure management capabilities HCLs services / industry offering will create value for Axons diversified blue-chip customer base with a strong position in the UK public sector and other defensive sectors HCLs strong SAP presence in the US and Asia complement Axons excellent position in the UK
Contd.
HCLs position as a Global Services Partner of SAP will strengthen Axons ability to win more transformational customers HCL Technologies was missing the ERP ( enterprise resource planning) piece at the time and it needed to fill this gap badly to become a full-service player. Axon helped it become a billion-dollar player in ERP
Axon Group plc. (Axon): Listed on the prestigious London Stock Exchange, Axon is one of the leading players in the enterprise application services (EAS) segment. Axon helped organizations which selected SAP, to fulfill their needs as their strategic enterprise platform.
Standard Chartered Bank, UK (SCB): For the acquisition of Axon, the
Date
January 2008 August 25, 2008
Events
HCL initiates negotiations for acquisition of Axon. Formal bid made by Infosys for acquisition of Axon for GBP 407.1 million (600 pence per share). Implementation agreement concluded and board of directors of Axon (Board) recommends the offer to the shareholders of Axon. Publication of the Scheme document for proposed acquisition by Infosys. HCL announces a formal bid to acquire Axon for GBP 441.4 million. 60 hours mandatory reaction window for Infosys to make counter bid lapses and Infosys does not revise its offer. Board decides to withdraw recommendation for Infosys bid and extend fresh recommendation to HCL. HCL EAS purchases 301,623 Axon shares, which represent 0.47% of the paid up share capital of Axon, through open market. Infosys officially withdraws its bid and HCL decides to implement the offer by way of a Scheme. HCL EAS purchases 6.71 million shares, which represent 10.43% of Axons paid up share capital, through open market. Publication of the Scheme document for proposed acquisition by HCL EAS.
September 20, 2008 September 26, 2008 September 29, 2008 October 2, 2008 October 8, 2008 October 10, 2008 October 12, 2008 October 24, 2008
November 24, 2008 Axon shareholders approve HCLs bid by voting in court meeting approving the Scheme and in the extraordinary general meeting (99.9% votes). December 10, 2008 Hearing by the High Court for sanctioning the Scheme. December 15, 2008 High Court approval obtained and HCL announces the successful closing of the acquisition of Axon. December 29, 2008 By this date, Axon shareholders should receive the full consideration.
Gross Profit
Other Expenses Operating Income Net Interest Expense
30,607.40 24,638.50
17,627.20 14,829.40 12,980.20 9809.10 559.2 181.1
19,06.10
11,063.10 7983.00 35.8
12,920.60
5,952.10 6968.50 349.6
10,702.00 13,491.20
11,828.60 1290.30 14,279.50 1040.80
7246.40
7483.10 558.9
6659.90
7150.20 498
-24.2
-55.6
-17.5
6,906.70 6,906.70
-465
6,187.20 6,187.20
29.11
16.68
20.63
20.18
17.22
0.01
0.01
0.14
0.28
0.17
16.60
11.72
14.88
15.57
17.40
Being an SAP partner creates an immense growth opportunity for HCL. Market offers a $35 bn - $37 bn opportunity for service vendors The Axon merger will allow HCL to tap into this large SAP market, particularly in Western Europe. The acquisition increased penetration in Europe, mostly in the UK and also in the US and Asia/Pacific. To date, the combined company has delivered more than 150 projects for over 90 customers around the globe with the help of a cadre of more than 550 practitioners. HCL Axon will be able to derive benefits from fast-growing sector (where HCL previously had a very weak presence) along with a strong UK presence.
Contd.
HCL was aiming to become one of the most valuable brands in the world by 2010, the acquisition of Axon was a decision in this direction.
Axon had gained expertise in delivering SAP enabled business solutions and it offered consultancy services to leading multinational companies in no. of countries. Analysts also said that with the acquisition deal, HCL might emerge as a prominent player even in India, where there are huge demand for SAP applicants in many sectors like defence, railways, telecom etc.
The Deal was not welcomed by its share holders. HCLs share prices witnessed a sharp fall after the deal was announced. According to Anagram Stock Breaking House, it was not prudent decision for HCL to enter the European market with a view to expanding its geographical presence as the UK market was likely to be more impacted than the US in future. The timing of the HCL Axon deal was also not considered appropriate due the fact that most of the outsourcing clients for the Indian IT companies in the US and UK market were cutting down on their IT budget due to economic slowdown. According to the Emkay, the Poor macro environment could cause negative impact on Axons business dealings, which could show up in HCLs future financial performance.