Tech Mahindra, a specialist in digital transformation, consulting and business re-engineering, announced that it has signed a definitive agreement to acquire global network services, leader Lightbridge Communications Corporation (LCC) for an enterprise value of approximately USD 240 million, subject to regulatory approvals. The transaction is expected to close by Q4 of Tech Mahindra's 2015 Fiscal Year.
Commenting on the aquisition, Ankita Somani, Marwadi Shares & Finance (MSFL), said, ''The acquisition comes even as Tech Mahindra looks to reach its target of USD 5 billion in revenues by 2015. We believe that this acquisition is positive for Tech Mahindra as it continues to strengthen its presence in one of its focus areas of network services (as per industry research, this is a USD 40 billion opportunity). Tech Mahindra expects to close this transaction by Q4FY15. We maintain our Hold rating on the stock.''
On the other hand, Rumit Dugar, Religare, said, ''The deal, made for a total consideration (EV) of USD 240 million, values the company at 7x EV/EBITDA CY14 - reasonable in our view. Network services in the telecom vertical is TECHM’s focus area, and this acquisition should strengthen its size, reach and capabilities, while offering client access and room for margin improvement. Maintain Buy.''
''Over the past two years, Tech M has increased its focus on Managed and Network Infrastructure Services in the Telecom vertical. Large deals won by Tech M in this area include KPN and BASE. The deal would increase our USD revenue estimates for FY16 by 11% to USD 4.66 billion. We believe that the deal will negatively impact FY16 EBDITA margins by 100bps. However, the deal could be marginally accretive on earnings for FY16. Overall, we believe this is a directionally positive acquisition which can further enable Tech M in marching towards its revenue target of USD 5 billion by CY16E. Maintain Buy with a TP of Rs 2,808/sh, said, Madhu Babu, HDFC Securities.
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