Zensar to buy U.S.-based Akibia for $66 mln in cash

Last Updated: Mon, Nov 22, 2010 12:10 hrs

Software services provider Zensar Technologies Ltd on Monday signed a definitive agreement to acquire U.S.-based PSI Holdings Inc's unit Akibia for $66 million in cash in bid to increase its on-site presence.

Massachusetts-based Akibia provides IT services to companies worldwide to help them optimise, manage and support their infrastructure and has more than 900 customers.

"There were at least three bids in which we could not participate because they wanted at least 30 percent of work to be done on shore, which was difficult for us to provide," said Ganesh Natarajan, vice-chairman and chief executive, Zensar.

The Akibia deal will enable Zensar to bid and secure large contracts with values ranging from $5 million to $15 million, whereas earlier the firm could only cater to contracts worth $2 million to $3 million, said Krishna Ramaswami, vice-president, strategic services unit at Zensar.

Akibia's operations are mostly based on-site, with only one project offshore, Natarajan said.

The deal will be funded partly by way of internal accruals and the rest through debt and is expected to close this quarter, Natarajan said.

The deal will add 1-1.5 percent to Zensar's gross margins next fiscal onwards, said Chief Financial Officer S. Balasubramaniam.

Akibia, which was founded in 1988, has revenue of more than $100 million and counts companies such as Hewlett-Packard, IBM , Verizon and Goldman Sachs as its customers.


Zensar will continue to look for more acquisitions, preferably in the infrastructure management segment in strategic geographies, Natarajan said.

The company, which has a presence in about 18 countries, will consider targets in Latin American countries, Germany, the U.K. and Holland, among others, he added.

Natarajan said Zensar had earmarked about $100 million to spend on acquisitions, of which $66 million will be on the Akibia buy.

Shares of Zensar closed up 2.44 percent at 161.80 rupees in a firm Mumbai market.

($1 = 45.38 Indian rupees)

(Reporting by Manasi Phadke; Editing by Rajesh Pandathil)

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