Oracle to Buy Most of India's I-Flex for $909 Mln
Aug. 2 (Bloomberg) -- Oracle Corp., the world's third-largest software maker, will buy a majority stake in India's I-Flex Solutions Ltd. for as much as $909 million to add programs that help banks manage loans, accounts and credit risk.
The company will pay Citigroup Inc. $593 million for its 41 percent stake and as much as $316 million for an additional 20 percent from the public, Oracle Chief Financial Officer Greg Maffei said today on a conference call.
The purchase, Oracle's fifth this year, gives Chief Executive Larry Ellison a wider product line for banks, one of the biggest markets for technology purchases. I-Flex programs dovetail with Redwood City, California-based Oracle's software that helps banks run internal operations such as planning, sales and marketing.
``Banking software is a high-growth area,'' said Apurva Shah, an analyst with ASK Raymond James & Associates in Mumbai who rates I-Flex shares ``hold.'' ``There have been patches and patches on that old software, and it's old and inefficient.''
Ellison already this year has pushed Oracle to spend more than $11.2 billion on acquisitions of big competitors such as PeopleSoft Inc. and small companies with new technology such as TimesTen Inc. He also hired former Microsoft Corp. dealmaker Maffei as his finance chief.
Shares of Oracle rose 5 cents to $13.57 at 11:58 a.m. New York time in Nasdaq Stock Market composite trading. They have dropped 1.2 percent this year. Twenty-eight analysts suggest buying the stock, seven recommend holding and two have ``sell'' ratings.
I-Flex shares rose 68.20 rupees, or 8.2 percent, to 896.15 rupees in Mumbai. They have gained 41 percent this year.
Big Spenders
Oracle has more than doubled its workforce in India to 6,900 since July 2003. In May, Oracle bought two software development centers after receiving options when the company acquired PeopleSoft for $10.6 billion in January.
Sales at Bangalore-based I-Flex are forecast to rise 34 percent this fiscal year as customers including General Electric Capital Corp. install its software.
Demand is rising as banks seek one program that manages everything from savings accounts to credit risk to loan portfolios, ASK's Shah said. Most banks designed their own software and many of those programs are outdated and costly to run, he said.
``When it comes to IT spending, banking is the mother of all industries,'' Oracle co-President Charles Phillips said in an interview. ``They spend a lot on technology.''
Financial services companies will spend $90 billion this year on information technology, a 3 percent increase from last year, according to Forrester Research Inc.
Acquisition Spree
Oracle has 8,500 banking customers and boasts nine of the top 10 banks in the world as clients, Ellison said on the call.
I-Flex, with 575 clients including UBS AG and Deutsche Bank AG, was founded in 1992 with financing from New York-based Citigroup, the biggest U.S. financial-services company, Phillips said on the call. I-Flex has about 5,500 workers.
The Indian company's first-quarter profit fell 86 percent after the software maker raised salaries to compete for skilled workers with rivals Tata Consultancy Ltd. and Infosys Technologies Ltd. Sales rose 19 percent.
Oracle offered 882.62 rupees ($20.27) for each of the shares it will buy from the public, 6.6 percent higher than yesterday's closing price in Mumbai. The offer to buy the stake from the public is required under Indian law.
The hostile takeover of PeopleSoft vaulted Oracle to No. 2 in the market for business-management software behind Germany's SAP AG. Oracle won a bidding war with SAP for Minneapolis-based Retek Inc. in March, paying $643.3 million for a company that sells business programs tailored to retailers.
Ellison added closely held ProfitLogic Inc. in July, snapping up another retail-software maker. Oracle also bought closely held Oblix Inc. and TimesTen to add technology to its databases, the company's biggest and most-profitable division.
By total software sales, Oracle trails Microsoft Corp. and International Business Machines Corp.
To contact the reporter on this story: Ron Day in Princeton at rday1 at Bloomberg.net; J. Kyle Foster in Princeton at kfoster2 at bloomberg.net.
Last Updated: August 2, 2005 12:00 EDT