Essar to buy AGC for Rs 205 cr

Mumbai: Deal will put BPO arm, Aegis, among top five IT solution providers in India.

The Essar group today said it would acquire US-based Avaya’s entire 59.13 per cent stake in AGC Networks, a company in the area of communications solutions, for $44.5 million (Rs 205 crore) or Rs 245 a share.

Business Standard had, on May 16, reported that Aegis, the business process outsourcing (BPO) arm of the Essar group, was in advanced talks to acquire AGC Networks. This acquisition would make Aegis among the top five information technology solution providers in the country.

The acquisition would be done through Essar Services Holdings Ltd (ESHL). Essar Capital Finance Pvt Ltd, along with ESHL, will announce the mandatory open offer tomorrow for an additional 20 per cent stake at a price determined in accordance with the formula specified in the takeover regulations. Assuming all shares are tendered in the open offer, its size would be Rs 78 crore.

Avaya Inc, the US-based business communication systems provider, owns the 59.13 per cent stake in AGC through Avaya Mauritius (33.63 per cent) and Avaya International LLC (25.50 per cent). Other than the promoters, Reliance Capital Trustee Company Ltd A/c Reliance Growth Fund holds 6.6 per cent stake and SBI Mutual Fund has one per cent holding.

AGC Networks, earlier known as Avaya GlobalConnect Ltd, is a converged communications provider focused on the India and Australia market. It employs around 500 people. The current management is expected to continue and spearhead the business, post-closing. Edelweiss Capital Ltd is the sole advisor to the transaction and manager to the open offer.

Aegis was already planning an initial public offering this year. This acquisition, when complete, would also allow Aegis to strengthen the growth of its subsidiary, Aegis Tech. In June 2009, Aegis had announced its foray into infrastructure management by setting up an independent subsidiary. The company had then said it planned to invest $100 million in this venture over the next 12 months and would touch revenue of $100 million in the next 18 months.

Inorganic growth

Aegis has acquired 13 firms in the past three to four years. It had stated in the past that its target was to make four acquisitions a year. On May 19, it signed an agreement to acquire US-based Sallie Mae’s customer services centre in Texas. The company did not disclose the sum of the deal. This agreement is effective from June 4. As part of the deal, Aegis also entered into a multi-year, multi-million dollar deal with Sallie Mae. With this acquisition, Sallie Mae was to transfer 350 employees to Aegis, taking the company’s US headcount to 4,350.

AGC Networks had also undergone several changes in the past year. The company renamed itself. Till a year before, it was the sole subsidiary of Avaya Inc. It also started working with other partners like Polycom, Extreme Networks and others. AGC Networks clocked revenue of Rs 515 crore for 2008-09. For the second quarter ended March 31, it reported net profit of Rs 9.3 crore, exceeding net profit of the previous financial year in six months. Revenue of the company for the quarter touched Rs 138.5 crore.

Aparup Sengupta, managing director and Global CEO, Aegis Ltd, said: “Essar, in a short span, has become a key player in the systems integration (SI) space and would benefit immensely from the depth and width of expertise AGC Networks has. We have a definite plan to grow this business as we aim for bigger chunks of customer spends.”

“AGC Networks provides a great synergy with our SI business,” said S K Jha, president, SI business, Essar, adding the the acquisition would help them gain “deep expertise in the ‘enable’ block of experience management that Essar embarked upon through its worldwide expansion drive. Now, customers will have the ability to have unified communication and experience management under one roof”.

Said Jangoo Dalal, managing director, Abaya India, “The AGC Networks relationship remains key to Avaya’s success in India and Australia, both through the period of this transaction and beyond. In India, we work together to serve some of the country’s leading organisations spanning multiple business sectors and we look forward to continuing to work with AGC Networks as a trusted and well-established business partner.”