5:37 AM
TCS units-Mitsubishi merger to create $600 mn company
TATA Consultancy Services (TCS) on Monday signed an agreement to merge two units in Japan with an arm of Mitsubishi Corporation to form an IT company with expected sales of USD 600 million.
Under the agreement. India's largest software services firm will merge TCS Japan and Nippon TCS Solution Center with IT Frontier Corporation (ITF). die fully-owned arm of Mitsubishi. The new company is yet to be named.
TCS will hold a SI per cent stake and Mitsubishi -19 per cent in the merged entity, which is expected to have an annual turnover of over USD 600 million from the next financial year.
The new entity is expected to be operational from July if approvals are in place and is expected to report revenue of USD 300 over the remaining nine months of the financial year.
"We have decided to combine Nippon TCS Solution Center. TCS Japan and IT Frontier Corporation lo create a company of USD 600 million revenue. We expect the
deal to close by June, provided that all the regulatory approvals arc in place." TCS Managing Director and Chief Executive, N Chandrasekaran told reporters here after announcing the deal.
TCS would have 51 per cent slake in the new company in lieu of the worth of TCS Japan, which was an individual entity, plus a cash payment of USD 50 million, he said.
TCS Japan had USD 100 million in revenue last fiscal, he added.
"For TCS it means that our operations in Japan will scale up from USD 100 million to USD 600 million per annum straightaway. We will also enhance our local presence significantly because this transaction will add 2.400 professionals besides business associates." he said.
TCS. however, had Ihc option of increasing its slake in the merged firm. Chandrasekaran said.
"In terms of hiking the stake, we have the option to increase it over
TCS will hold a SI per cent stake and Mitsubishi -19 per cent in the merged entity, which is expected to have an annual turnover of over USD 600 million from the next financial year.
The new entity is expected to be operational from July if approvals are in place and is expected to report revenue of USD 300 over the remaining nine months of the financial year.
"We have decided to combine Nippon TCS Solution Center. TCS Japan and IT Frontier Corporation lo create a company of USD 600 million revenue. We expect the
deal to close by June, provided that all the regulatory approvals arc in place." TCS Managing Director and Chief Executive, N Chandrasekaran told reporters here after announcing the deal.
TCS would have 51 per cent slake in the new company in lieu of the worth of TCS Japan, which was an individual entity, plus a cash payment of USD 50 million, he said.
TCS Japan had USD 100 million in revenue last fiscal, he added.
"For TCS it means that our operations in Japan will scale up from USD 100 million to USD 600 million per annum straightaway. We will also enhance our local presence significantly because this transaction will add 2.400 professionals besides business associates." he said.
TCS. however, had Ihc option of increasing its slake in the merged firm. Chandrasekaran said.
"In terms of hiking the stake, we have the option to increase it over
a period of lime, initially 10 66 per cent and then further.- he said.
"But currently our focus is to build a very strong company and have an aspiration to build a very large IT sen ices company in Japan." Chandrasckaran added.
Prior to the merger, both TCS Japan and the Mitsubishi arm operated as separate companies with US dollar 100 million and US dollar 250 million revenue per annum, respectively.
"With this transaction, we will have the necessary scale, a strong delivery model, a number of key clients and a financial model that will help us to accelerate our growth." Chandrasekaran said.
Mitsubishi would be a strategic client for TCS with revenue of over USD 250 million, he said.
"But currently our focus is to build a very strong company and have an aspiration to build a very large IT sen ices company in Japan." Chandrasckaran added.
Prior to the merger, both TCS Japan and the Mitsubishi arm operated as separate companies with US dollar 100 million and US dollar 250 million revenue per annum, respectively.
"With this transaction, we will have the necessary scale, a strong delivery model, a number of key clients and a financial model that will help us to accelerate our growth." Chandrasekaran said.
Mitsubishi would be a strategic client for TCS with revenue of over USD 250 million, he said.
Posted in: News 2014
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