India's Infosys to buy Axon for £407m

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The Independent Online

Axon, the IT consultancy group, is set to be swallowed up by the Indian computer services giant Infosys Technologies in a deal worth £407.1m. The merger, if approved, will be the biggest overseas acquisition by an Indian IT group.

The all-cash offer, which has been recommended by the Axon board, is worth 600p a share. The offer represents a 33.1 per cent premium over Axon's average closing price in the last six months, but the actual return to shareholders will be a more modest 19 per cent as the shares, which closed at 502.5p last Friday, have jumped by 15.4 per cent in the past month.

Axon specialises in advising companies how to best operate SAP computer platforms, and has been growing through acquisition in the United States. The group, which last month bought Australia's Consulting Principles for A$3.45m, is due to report its interim results today.

The deal will give Infosys a foothold in the UK SAP market. The Indian company provides consultancy services for a number of IT platforms, and is understood to want Axon because of its position as a higher-end consultancy, able to generate higher margins by offering after-sales service, such as maintenance assistance.

Infosys, with a market capitalisation of $24bn, is India's second biggest IT services provider behind Tata. A source close to the deal argued that the transaction was a good fit. "SAP requires a real skill-set and even though Infosys already operates in the sector, for a first piece of larger M&A, Axon gives them a great leg-up," he said.

Infosys has been looking west to increase revenue in order to better compete with Tata.