Hyderabad: Megasoft Ltd, a Hyderabad-based telecom software product company, has announced an agreement to acquire the Nasdaq-listed Boston Communications Group Inc., a billing software company, for $65 million (Rs263 crore) in an all-cash deal that the company hopes to complete by December.
Megasoft’s CEO and managing director G.V. Kumar said that the company will acquire the common stock of Boston Communications at $3.6 a share. That’s a premium of 81% to the scrip’s closing price of $1.99 on Tuesday.
“We are going to fund the acquisition entirely through internal accruals and borrowings by leveraging on our assets. We do not have any plans to raise funds through privately placing our equity to fund this acquisition,” Kumar said.
According to the agreement between the two companies, a subsidiary of Megasoft will make an open offer to acquire all the outstanding shares of Boston Communications. The offer is likely to begin on or before 1 August and expire at midnight after 20 business days. The boards of directors of both Megasoft and Boston Communications have approved the definitive agreement between the two companies, said Kumar.
“This transaction creates significant value for Megasoft shareholders and expands our market and technology leadership in what is one of the most exciting areas of our industry’s transformation—convergent telecom,” he added.
An industry expert said the merger would work to the benefit of the two companies. “The merger of Megasoft and Boston Consulting brings together complementary technology platforms that will address the emerging needs of current telecom client roster. The merger presents multiple cross-sell and up-sell (selling an upgrade of an existing software) possibilities,” said Alok Shende, vice-president, ICT practice, with research firm Frost & Sullivan.
Boston Communications had earlier issued a guidance of $70 million for 2007; it has 350 employees, of whom 100 work at a development centre in Hyderabad. Megasoft, which has 1200 employees, ended 2006-07 with a revenue of Rs180 crore. It has issued a guidance of revenues of between Rs300 crore and Rs330 crore for the current fiscal year. Kumar said the merged entity would touch Rs1,000 crore in revenue by 2009.