India's Infosys to buy UK's Axon Group for $753 mln

By Sumeet Chatterjee and Rina Chandran

BANGALORE (Reuters) - Infosys Technologies (INFY.BO) said on Monday it had agreed to buy British consultancy Axon Group Plc for 407 million pounds ($753 million) as India's second-biggest software services exporter looks for growth beyond an uncertain U.S. market.

The cash deal values Axon AXO.L at six pounds per share, a 19.4 percent premium over Friday's close of 5.025 pounds and 33 percent over the average price of the last six months, Infosys CEO Kris Gopalakrishnan said.

The offer price included any interim dividend that Axon, which has a market value of almost $600 million, may announce when it releases results on Tuesday, Infosys said.

The Axon board has already "unanimously recommended" the offer, with its large shareholders and some key employees also supporting the deal, Infosys CFO V. Balakrishnan said.

London markets were shut on Monday for a public holiday.

"They wanted to enter Europe in a big way, and probably this is the reason why they have paid a higher premium," said R. K. Gupta, managing director of Taurus Mutual Fund in New Delhi.

"It's a positive sign for the company because they were sitting on a huge cash pile, and it was not generating any return."

Subject to shareholder and regulatory approvals, Nasdaq-listed Infosys (INFY.O) expects to complete the deal in November.

Axon, which provides services to companies using products of German business software maker SAP (SAPG.DE), would be delisted, Infosys said.

"The objective is to create a leading global SAP services provider," Gopalakrishnan said at a news conference.

"There is strong demand for these sevices, and (this) will allow us to leverage the capabilities and strengths of both to have global reach, scale and financial strength to participate in deals that are large," he said, but declined to give guidance on the impact of the acquisition on Infosys' margins.

ABN AMRO was the banker to Infosys and Citibank (C.N) was the banker to Axon.

Ahead of the announcement, shares in Infosys, which the market values at $22 billion, ended 0.5 percent higher at 1,703.05 rupees in a market .BSESN that closed up 0.3 percent.

VERY HIGH GROWTH

Indian outsourcing firms such as Infosys and its bigger rival Tata Consultancy Services (TCS.BO) are expanding in Europe, Asia, the Middle East and Latin America to cut dependence on the U.S. market, which accounts for more than half the sector's revenue.