Cerebral Shangrila

Wednesday, August 03, 2005

Oracle buys a majority stake in i-flex

Oracle, the world's second largest software firm, has acquired a majority stake in i-flex solutions . It will buy-out the 41% stake of Citi for $593 million (Rs 800 per share). It will further buy another 20% from the open market for Rs.882.62.

What is interesting in this deal is that i-flex's stock closed at Rs.897.25 on NSE yesterday. So why is Oracle offering the VC's (Citi) and investors far less than the closing price ?

i-flex is the most prominent "product" company in India and would continue to be run independently after the acquisition. Here is an article in BusinessWeek on the strategic fit of i-flex in the Oracle empire.This is what Rajesh Hukku (CEO,i-flex) had to say ""This is a validation that one of the world's largest software companies has chosen an Indian software company," . "It's a validation of the quality and complexity of Indian software, and it's a shot in the arm for other Indian software product companies."

So will we be seeing more tech acquisitions in India in the future ?


  • The reason for the Rs. 800 price is that, bigger banks were not interested in buying the Citigroup stake as citi has milked iflex to the maximum extent. the new acquiring bank might not get any competitive advantage as Citi has already gained mileage out of it.

    So the only option out was a sale to other IT biggies and hence the need to sell at a discount.

    By Blogger Kaps, at 10:07 AM  

  • To me it sounded like i-flex needed Oracle more than Oracle needing i-flex ( Which is why there was a negative premium) ..

    By Blogger Cogito, at 11:44 AM  

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