Infotech to acquire US-based Softential for over $17mn - Angel Broking

Infotech has announced that its wholly owned subsidiary, Infotech Enterprises America, Inc. has signed a definitive agreement to acquire Softential, Inc. Management indicated that price paid for the acquisition would be ~1.1x of its 2013 revenue (US$17m) plus performance-based earn-out component in the first year. Based on the above information, upfront price paid would be ~US$18- 20mn and the company expects to finance it with 50% equity and 50% debt.

Softential provides IT service management and service assurance for clients in telecommunication and cable operators. It has ~140 FTEs. As per management, this acquisition would enable Infotech to broaden its service portfolio for its existing customers in telecom industry segment. As per management, revenue for Softential has remained largely flat for the last three years and current EBITDA margins are 25%. Management expects to drive revenue to US$30m by 2016E (implies CAGR of 21%) and maintain its EBITDA margins at 25%+. This acquisition is expected to be EPS accretive in FY2016. The stock is already trading at ~13x FY2015e earning, which is higher than average of ~10x, we maintain our Neutral rating on the stock.

Source : Equity Bulls

Keywords