Nasdaq-listed Covansys Corporation, a global consulting and technology services company, on Friday announced that its wholly owned subsidiary, Covansys India Limited, intends to acquire up to 75 per cent (up to 4.05 million shares) of Fortune Infotech Limited's common stock for Rs 32.50 per share ($0.74 per share).
The deal would thus be in the range of Rs 13.20 crore (Rs 131.20 million).
Covansys intends to fund the acquisition with cash from its India operations. Fortune's current annual revenue is less than one per cent of Covansys' revenue. The company does not expect the acquisition to have a material impact on its results of operation in 2005.
Like Covansys, which launched its offshore operations in 1992, Fortune, with its principle office located in Baroda, India, is an experienced provider of offshore outsourcing solutions. Fortune focuses on business process outsourcing and provides back office services such as transaction processing, claim processing and accounts payable processing services.
The transaction enhances Covansys' BPO capabilities and increases the company's ability to meet the needs of existing and prospective clients in the commercial sector.
Raj Vattikuti, Covansys' President and Chief Executive Officer, said, "This transaction is an important next step in our plan to capitalise on the significant opportunities in the BPO market. Our acquisition of PDA Software Services in 2002 has provided Covansys with valuable experience meeting clients' BPO needs and now, with Fortune, we are well-positioned to enhance this service offering. This transaction will augment our existing claims processing and invoice processing expertise and enable Covansys to provide a full suite of BPO services to our clients."
Kantilal K Patel, Chief Executive Officer and Managing Director of Fortune Infotech Limited, said, "With its financial strength and global presence, Covansys is the ideal partner for Fortune. This transaction facilitates both companies' efforts to drive growth in the rapidly developing BPO market and will help to expand the services Fortune offers to clients."
"I am confident that Fortune employees will enjoy greater opportunities and resources as a result of our relationship with Covansys."
Krishnaswamy Subrahmaniam, President and CEO of Covansys India Limited, said, "With its complementary service offerings, we will leverage Fortune's capabilities to enhance existing client relationships and establish Covansys as the preeminent provider of BPO solutions. We look forward to a quick and seamless completion of this transaction."
Fortune has operations in Baroda and Bangalore, India as well as a US office in Princeton, NJ. Fortune Infotech Limited was founded in 1998 and has approximately 560 employees.
Under the terms of the transaction, Fortune will be a majority-owned subsidiary of Covansys India Limited. Subrahmaniam will oversee Fortune's operations following the close of the transaction.
The transaction is conditioned upon the satisfaction of customary conditions and regulatory approvals in India. Covansys expects the transaction to close in 2005.