Wipro Technologies is making its biggest ever acquisition. It is buying New Jersey-based Infocrossing for $ 600 million (Rs 2,460 crore) in an all cash deal. It has signed a definitive agreement with Infocrossing to acquire the latter paying $ 18.70 (six months average price) per each of its fully diluted 32 million shares, with 13% premium.

Infocrossing focusses on infrastructure management, enterprise application and business process outsourcing services. The company that employs 900 people in five different data centres — New Jersey, California, Georgia, Arizona and Nebraska — provides end-to-end remote infrastructure management solutions like server management, mainframe outsourcing, network management and security services to around 200 clients. During the fiscal ended March 3I, 2007, it posted revenues of $ 229 million with a net profit of .5 million. It has net assets of $ 300 million.

Wipro president Suresh Vaswani said the acquisition will be conducted through a tender offer, which will follow the merger of Infocrossing with Wipro subsidiary, Wipro Inc. The tender offer is subject to a number of customary closing conditions, including regulatory approvals, and is expected to be completed by December while it is expected to reflect on revenues from the fourth quarter onwards.

Wipro has made a series of small acquisitions around the world in the past few years to fill gaps in its portfolio, a process that Wipro chairman Azim Premji has called the ‘string of pearls' strategy. But the Infocrossing acquisition is far bigger than any so far.

Sudip Nandy, Chief Strategy Officer, Wipro said that "We have been mentioning in the past that in the infrastructure management space one of the elements that we were looking to address was the capability gap that we had regarding managed data center hosting servicing. We provide a range of services but we didn’t have this particular relevant. So we were looking at adding on this capability and Infocrossing provides that capability. Therefore the rationale is to provide a complete end-to-end infrastructure management solution, which we now have the capability of offering to our clients."

The deal was a little expensive at US $ 600 million because as per global benchmarks the deal sizes are about two times topline and about 9 times EBITDA and Wipro has paid about 14 times EBITDA. But Nandy countered this by saying that, "It depends on the value of the property and the amount of strategic fit that you consider within each of these properties. As far as we are concerned we think there is a very solid synergy and the fit which we have for this justifies the price that we have paid. I think its not about 14 times it will be a little less and it will work to about 12 but we think this is the right price for the property."