HCL Tech to Buy Geo­met­ric in $200m Share Swap Deal

Deal ex­pected to bol­ster IT ma­jor’s en­gi­neer­ing & R&D ser­vices Tata may Merge Euro­pean Steel Biz with Thyssen

The Economic Times - - Companies -

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New Delhi: HCL Tech­nolo­gies will buy most of Geo­met­ric in a share swap deal es­ti­mated at $200 mil­lion, a devel­op­ment which is seen bol­ster­ing its en­gi­neer­ing and R&D prac­tice.

HCL will is­sue is­sue 10 shares of .₹ 2 each to Geo­met­ric share­hold­ers for ev­ery 43 eq­uity shares of Geo­met­ric of .₹ 2 each held by them. In to­tal, HCL will is­sue 15,640,546 shares.

The deal ex­cludes the 58% stake that Geo­met­ric owns in the JV — 3DPLM Soft­ware So­lu­tions — with Das­sault Sys­tèmes.

In a state­ment, GH Rao, the pres­i­dent for en­gi­neer­ing and R&D ser­vices at HCL Tech­nolo­gies, talked up the “syn­er­gies” be­tween the two com­pa­nies the busi­ness line he heads. Manu Parpia, CEO, Geo­met­ric, pitched the deal as ben­e­fi­cial for cus­tomers and em­ploy­ees be­cause they get to en­joy the ad­van­tages of work­ing with a larger com­pany in the form of HCL Tech­nolo­gies. HCL, which has been heav­ily de­pen­dent on its in­fra­struc­ture man­age­ment ser­vice busi­ness, has been in­vest­ing in de­vel­op­ing the en­gi­neer­ing prac­tice. The com­pany’s ag­gres­sive­ness in this space has led to the seg­ment al­ready con­tribut­ing over $1 bil­lion rev­enue in 2014-15.

In the last quar­ter, en­gi­neer­ing and R&D ser­vices con­trib­uted 18.6% to the com­pany’s rev­enue. If an ecom­merce en­tity has in­ven­tory on lease ba­sis, which cat­e­gory will it fall un­der – in­ven­tory-based or mar­ket­place? In calendar 2015, the seg­ment reg­is­tered a growth rate of 23%.

Founded in 1984 as a Go­drej firm, Geo­met­ric was spun off as an in­de­pen­dent en­tity. Be­fore the deal, Go­drej In­vest­ments and Go­drej & Boyce Man­u­fac­tur­ing Com­pany owned a 31.09% stake. Parpia’s hold­ing was 6.73% while in­vestor Rakesh Jhun­jhun­wala and his wife to­gether held 19%. Geo­met­ric which has been scout­ing for a strate­gic in­vestor for a cou­ple of years now, has a “good en­gi­neer­ing prac­tice,” said an ex­ec­u­tive at a lead­ing IT ser­vices firm which had con­sid­ered buy­ing Geo­met­ric a year ago. “As­sum­ing that HCL is go­ing big in the en­gi­neer­ing space, that is one at­trac­tion,” said the per­son. “Since they were a niche player with un­der $200 mil­lion in rev­enues, I think How should sale from ven­dors be mea­sured – on weekly, monthly or yearly ba­sis? they were bet­ter suited in a big­ger com­pany.”

Lately, HCL has been on a buy­ing spree and Geo­met­ric marks the com­pany's fifth ac­qui­si­tion in the last two years. While in July it ac­quired cer­tain as­sets of Trygstad Tech­ni­cal Ser­vices, a US-based IT con­sult­ing ser­vices and so­lu­tions firm which has ex­per­tise in ar­eas of core en­gi­neer­ing, In­ter­net of Things, em­bed­ded sys­tems and In­tel­li­gent Sys­tems, it bought a Ben­galuru-based pri­vately held en­gi­neer­ing ser­vices firm, Con­cept to Sil­i­con Sys­tems ( C2SiS), for an undis­closed sum. In Oc­to­ber, HCL also de­cided to take over Swedish au­tomaker Volvo Group's ex­ter­nal IT busi­ness, which pro­vides IT in­fra­struc­ture, mainframe ser­vices and ap­pli­ca­tion op­er­a­tion ser­vices, for an all­cash pay­ment of $138 mil­lion. Our Bureau: Tata Steel and Ger­many's Thyssenkrupp have been talk­ing about com­bin­ing their Euro­pean steel op­er­a­tions, most likely ex­clud­ing UK, ac­cord­ing to sev­eral me­dia re­ports.

Talks had been on­go­ing for about a year but de­clined to com­ment on their cur­rent sta­tus, said a Reuters News re­port, cit­ing a source, who did not want to be named be­cause he is not au­tho­rised to speak pub­licly.

Tata Steel de­cided to sell or re­struc­ture its poorly per­form­ing UK steel busi­ness on Wed­nes­day, giv­ing up its nine-year fight to sal­vage the op­er­a­tions of the busi­ness it bought as part of the buy­out of Corus at the height of the com­mod­ity price boom in 2007.

Tata Steel’s Nether­lands op­er­a­tions are prof­itable while steel­mak­ing units in UK were los­ing money.

A per­son familiar with the situation told Reuters that Thyssen's su­per­vi­sory board had not yet dis­cussed the mat­ter, while two other sources with knowl­edge of the mat­ter said that all of Europe's steel pro­duc­ers were talk­ing to one an­other but noth­ing con­crete was yet in sight. It also wasn’t im­me­di­ately clear where the talks be­tween Tata Steel and Thyssen now stand.

Should Tata sell its UK op­er­a­tions, its Euro­pean “ex­po­sure would fo­cus ex­clu­sively on Nether­lands-based flat prod­ucts busi­ness at Ij­muiden”, Jefferies an­a­lysts said in a note this week.

Can they also ad­ver­tise to con­sumers in or­der to gar­ner eye­balls and vis­its to their sites and thereby, help sell­ers?

Can they use prices given by sell­ers as the main mes­sage in their com­mu­ni­ca­tion strat­egy?

FILE PHOTO

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