The Hindu : Business : Flextronics buys 55 p.c. stake in Hughes Software

Online edition of India's National Newspaper
Wednesday, Jun 09, 2004

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Business

Flextronics buys 55 p.c. stake in Hughes Software

By Sandeep Joshi

NEW DELHI, JUNE 8. The Singapore-based Flextronics today announced the acquisition of Hughes Network Systems' entire stake of 55 per cent in Hughes Software Systems (HSS), a leading provider of software products and services to telecom infrastructure companies, for $226 million.

Flextronics, an electronics manufacturing services company, will pay Rs. 547 per share for the deal which is expected to be closed by October this year. As per the rules, the Singapore-based company will come out with an open offer within the next four days to acquire another 20 per cent outstanding shares of Hughes Software Systems as per the regulatory requirements.

"For the open offer, Flextronics will have to shell out $82 million more taking the size of the entire deal to $308 million," said Ash Bhardwaj, President, Design Services at Flextronics. After the acquisition, the HSS board would change to include representatives of Flextronics and will continue to be listed on the Indian stock exchanges, he added.

PTI reports:

"Electronics companies typically outsource component manufacturing, assembly services and design services. We had expertise in all these but were lacking on the software side. The acquisition of HSS has completed our range of offerings and will take us to the next level. This will help us service our customers better," Mr. Bhardawaj said.

HSS also hopes to get into new service lines with the change of promoters. "Our focus has been on telecom and Flextronics is into service lines where we aspire to be. Our association with them will help us to service telecom original equipment manufacturers," Arun Kumar, President and Managing Director of Hughes Software, said. HSS will, however, continue to stick to telecom as there are a lot of opportunities in this sector, Mr. Bhardawaj said.

The promoters of HSS, Hughes Network Services, had put their stake on block as it did not gel with its core business of entertainment. There was a lot of speculation as to who will pick up the stake. "While many names were floating around, Flextronics came into the picture in mid-May and closed the deal within three weeks," Mr. Kumar said.

After the news of the deal, HSS shares on the Bombay Stock Exchange closed 11.10 per cent up at Rs. 531.10 after touching a high of Rs. 538.

Flextronics, which already has a manufacturing facility in Bangalore, had revenues of $14 billion last year and employs 95,000 people in 29 countries. HSS will be its only subsidiary that will be listed on a stock exchange. In 2003-04, HSS revenues grew 63 per cent year-on-year to Rs. 360.40 crores and net income was Rs. 76.90 crores.

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