Oracle buys Iflex

MUMBAI, AUG 2:  The world’s second largest software firm, $11.8 billion Oracle Corporation, has signed an MoU to acquire Citigroup Venture Capital International’s entire 41% equity in i-flex Solutions for $593 million (Rs 800 per share).

As per Sebi’s takeover norms, Oracle will make an open offer at Rs 882.62 per share to acquire another 20% from the market. The $316 million additional payout for open offer will take deal size to $909 million. Public holds 27.44% of i-flex. The deal is likely to be closed by ‘05 end.

The Oracle scrip that opened at $13.52 on the Nasdaq on August 2, was up 0.44% within first 90 minutes of trade to $13.58 (Rs 584). The deal was announced after trading hours in India. The i-flex scrip was last quoted at Rs 897.25 on NSE.

Interestingly, Oracle’s proposed open offer share price (based on two-week’s trading average) is below the current market price of Rs 897.25. Analysts see Oracle’s open offer as a mere formality to comply with takeover norms. Oracle said it will not revise open offer price though it intends to own at least 50% equity.

i-flex’s flagship product, Flexcube, is the world’s largest-selling core banking software. It is used by banks in 54 countries and has led banking software charts for three years. i-flex provides software and services to 575 banks in 115 countries. Products and services each contribute approximately 50% of revenues.

At a teleconference, Oracle officials said existing management will continue to run the firm. i-flex will continue to function under the same name and market its products under the same brand names. About 40% of i-flex revenues come from Citigroup. Going forward, the company expects business from Citigroup to remain at current levels or even increase.

“The deal will help them cross-sell their products,” said Harit Shah, analyst, Equitymaster.com. Oracle has 17 of the world’s top 20 banks as its customers and the strategic acquisition will allow I-flex to target these banks as well as top banks in North America. Oracle said the deal was part of its strategy to get into niche verticals.

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