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This article details the acquisition of '''Infocrossing''' (IFOX) by Indian software company
'''[[Wipro]]''' Ltd. (WIT).
The cash tender offer was made public on 7th August, 2007 and the tender offer was
completed on 18th September’2007. The deal was executed by its indirect wholly-owned
subsidiary, Roxy Acquisition Corp., for all outstanding shares of Infocrossing, Inc.
(NASDAQ:IFOX) at a price of $18.70 per share in cash.

The deal was the largest overseas takeover by an Indian IT company for $600 million
(around Rs.2,425 crore) to create one of the world leaders in end to end IT infrastructure
management solutions. In fact, the Infocrossing '''[[acquisition]]''' is the second
transaction after the buyout of Unza by the consumer care & lighting division of the
company in July this year to have crossed the $100-million-mark in terms of its overall
size.

== Companies Involved: Wipro Technologies & Infocrossing ==

Wipro Technologies is a global services provider delivering technology-driven business

solutions that meet the strategic objectives of our clients. Wipro has 55+ ‘Centers of
Excellence’ that create solutions around specific needs of industries. Wipro is the World's
first '''[[CMMi]]''' Level 5 certified software services company and the first outside USA
to receive the '''[[IEEE]]''' Software Process Award.
'''Infocrossing''', Inc. is a leader in Selective '''[[IT Outsourcing]]''' Solutions. Their
services are designed to provide customers with the ability to strategically outsource non-
core IT operations and IT-driven business processes to reduce costs and improve
performance – without the risk or loss of control associated with wholesale outsourcing
engagements.
At the core of Infocrossing's capabilities is a national, Tier-1 datacenter infrastructure
with n+1 redundancy at every level, approximately 700 skilled professionals with
expertise across every computing platform, as well as proven processes and account
management methodologies drawn from twenty years of experience effectively servicing
mission-critical IT operations for large and mid-sized companies.

== Rationale for acquisition ==

=== Infrastructure as a driver of growth ===

Wipro Technologies has identified global infrastructure services as an important driver of

growth for the Company and is pleased to add '''Infocrossing''', which provides integrated
managed infrastructure services to premier global clients. The acquisition will help Wipro
address the existing gap in managed hosted services in infrastructure management. This
will also open existing opportunities in the total outsourcing space, which include IT
infrastructure services. It is expected that the combined infrastructure business from the
present $250 million to touch $1 billion in 24-36 months. It gives Wipro a uniquely
positioning in the remote infrastructure management space.

=== Global Expansion ===

With this acquisition, Wipro expands its appeal as a full-service IT outsourcing firm for
U.S. customers. Before, Wipro's services offerings might have been attractive to two out
of 10 U.S companies and now it goes to seven out of 10.

=== Technical Capabilities ===

This acquisition broadens Wipro's data centers and '''[[mainframe]]''' capabilities. With its
unique Platform based solutions, Infocrossing also brings in significant expertise in
Health plan & Payer Management segments.

=== Human Resource Capabilities ===

Wipro will gain 900 workers in five U.S. data centers and the global expertise of the
senior level executives at Infocrossing.

=== A proven track record ===

With its proven track record of processing over 175 million claims annually and
providing contracted services to over 90 managed care organizations, Infocrossing will
considerably enhance Wipro's ADM & BPO offerings to its Healthcare customers.

== Synergies for acquisition ==

The acquisition is a perfect fit for Wipro’s technology infrastructure services (TOS) and
gives an undisputed lead in remote infrastructure management services. It will leverage
Wipro's offerings in healthcare, '''[[BPO]]''' and IT infrastructure services. This will give a
leadership position in end-to-end IT infrastructure management solutions. '''Infocrossing'''
will deepen its presence in the US with addition of five state-of-the-art data center
locations and approximately nine hundred employees.

== Funding of the deal ==

It was an all cash deal executed by Wipro Technologies. Infocrossing has entered Wipro's
fold with assets of close to $300 million, cash reserves of $22.3 million and a debt burden
of $132 million. A part of the debt has also been converted because there is a convertible
option. After that, the debt will be around $55 million.

== The Deal ==

=== Financials ===

The enterprise value of the transaction was $609,429,597. Infocrossing for $18.70 per
share in an all cash deal created one of the world leaders in end-to-end IT infrastructure
management solutions. The acquisition was conducted by means of a tender offer for all
of the outstanding shares of Infocrossing, followed by a '''[[merger]]''' of '''Infocrossing'''
with a Wipro subsidiary. The tender offer was subject to a number of customary closing
conditions, including regulatory approvals, and is expected to close by the fourth quarter
of 2007.
As of the date of acquisition, '''Infocrossing''' had net operating losses, which are available
for carry- forward and set-off against taxable profits in the future. The Company believes
that it is more likely than not that approximately US$ 72 of net operating losses will be
available for carry-forward and set-off against the taxable income of Infocrossing in the
future. Accordingly, in the preliminary purchase price allocation, the Company has
recorded deferred tax assets of US$ 30 representing the tax benefits that can be availed.
In addition, pursuant to the terms of indenture agreement, the convertible debt of
'''Infocrossing''' has been cancelled. Liabilities assumed upon acquisition include Rs.
4,278 payable to the holders of convertible debt. Further, pursuant to the terms of the
stock option plan, all the outstanding stock options of Infocrossing have been cancelled.
Liabilities assumed upon acquisition include Rs. 823 payable to the stock option holders.

=== Human Resources ===

Wipro had 77,478 employees as of September 30, 2007 including 926 employees who
joined us as part of '''Infocrossing''' acquisition.

=== Advisors ===

Wipro was advised on the transaction by '''[[Citigroup]]''' and represented by the law firm
of Wilson Sonsini Goodrich and Rosati, and '''Infocrossing''' was advised by '''[[Credit
Suisse Securities]]''' (USA) LLC and represented by the law firm of Gibson, Dunn &
Crutcher LLP.

=== Expectations from the deal ===

Wipro expected the integration process to take 2-3 quarters. They expect revenues to pick
up led by demand from Wipro existing clients. Further, margins should improve led by 1)
higher offshore 2) better capacity utilization through more deals and 3) rationalization of
costs.

== Realized Benefits after the merger ==

=== Deals won ===

Wipro Info crossing has recently won a $275 million multi-year outsourcing deal to
provide BPO and IT services to Missouri Health Net Division, an agency run by the state
government to provide health care services to Missouri residents.
Info crossing Inc has been awarded a six-year contract to manage insurance claims and
health care processes of the division. The contract can be renewed for two more years,
which could take the deal value to up to $420 million, according to Info crossing CEO
Zach Lon stein. Missouri Health Net Division was an existing customer for Info crossing
with annual billings of about $20 million.
Lonstein says that after its acquisition '''Infocrossing''' has been able to generate 19 new
customer opportunities in just one month.

=== Supplemented Revenue ===

During the quarter ended September 2007, Global IT Services including BPO reported
revenues of Rs 3249 crore, which represents growth of 10% Q-o-Q and 19% Y-o-Y. The
IT services grew 9% at 2945.20 crore on the back of 7.7% Q-o-Q volume growth and
1.9%. The '''Infocrossing''' acquisition contributed Rs 25.40 crore. '''Infocrossing''' Inc, the
newly acquired Wipro subsidiary, was awarded a US$ 275 million contract to provide
fiscal agent services to Missouri HealthNet program into 2014.

== Government Policies pertinent to the merger ==

=== Supporting policies ===

'''IT Act 2000'''

Specific initiatives underway include enhancing the legal framework through proposed
amendments to the IT Act 2000, increasing interaction between industry players and
enforcement agencies to help create greater awareness about information security issues
and facilitate mutual support.

'''Policy on Overseas Investments'''

What has given a fillip to this M&A activity is the evolution of government policy on
overseas investments. For instance, the upward revision of the ceiling on quantum of
overseas investment and the introduction of FEMA in 2000, have changed the
perspective of overseas investments.
With companies being allowed to invest 100 per cent of the proceeds of their ADR/GDR
issues for acquisitions of foreign companies, direct investments in Joint ventures and
wholly owned subsidiaries through the M&A route has become a reality. Further policy
liberalization post 2003 allowing clearance through automatic route has enabled Indian
Companies to fund to the extent of 200% of their net worth.

'''Timeline for Approval of proposals'''

In a bid to assuage corporate India’s fears over key aspects of the Competition Act, 2007,
the Competition Commission of India (CCI) has decided to ensure that 90 per cent
merger and acquisition (M&A) proposals put up for its approval are cleared within 60
days. The present timeline is 210 days.
=== Complying policies and regulations ===

'''Merger Control Amendments'''

In September 2007, the Indian government had introduced new merger control
amendments to its Competition Act. The M&A provisions, once notified, will require
foreign companies, including those with limited access to Indian markets, to seek
approvals from India’s Competition Commission for M&As made anywhere in the world.

'''Complying with other regulations'''

Every M&A transaction in India has to ensure compliance with various regulations such
as the Competition Act 2002, Companies Act 1956, FEMA regulations, SEBI Takeover
Code, Stock exchange regulations, sector regulators, exchange control regulations etc.

== References ==

[http://www.businessweek.com/globalbiz/content/oct2008/gb20081024_710175.htm
BusinessWeek]<br />
[http://itoutsourcingindia.com/india/ IT Outsourcing]<br />
[http://www.moneycontrol.com/india/news/business/wipro-acquires-nasdaq-listed-
infocrossing-for-36;1870-psh-/296593 Money Control]
[http://www.wiprocorporate.com/pdf_files/US_GAAP_Financials_Q4_FY07_08.pdf
Wipro Corporate]<br />
[http://www.informationweek.com/news/management/outsourcing/showArticle.jhtml?
articleID=201300286 Information Week]<br />