At least one of the rumors floating around about another Oracle Corp. acquisition has panned out. The company announced Tuesday morning that it plans to buy a majority stake in Indias largest applications business, I-flex solutions Ltd., in a deal that amounts to about $909 million.
Bombay-based I-flex develops software that supports corporate, consumer and investment banking.
Under the terms of the agreement, Oracle will acquire 41 percent of the companys outstanding shares from its current owner, Citigroup Venture Capital International, for $593 million.
Indian law requires that Oracle bid for an additional 20 percent of the outstanding shares sometime Wednesday, spending an additional $316 million, according to a statement released by Oracle, of Redwood Shores, Calif.
The deal, subject to approvals, is expected to close by years end.
There are a couple of interesting facets to Oracle owning a majority stake in I-flex: it lets Oracle further expand its operations in India; it strengthens Oracles vertical market strategy in a broad geographic swath—I-flex has 575 banking customers in 115 countries; and it brings Oracle closer to its heretofore nemesis, IBM.
The I-flex products run on IBM software and hardware.
Oracle has made no secret of its plans to move beyond developing and selling traditional ERP (enterprise resource planning) applications—and best its major competitor SAP AG—by honing its vertical expertise. The company has had a laser focus on retail over the past several months, acquiring retail software developers Retek Inc. in a near-bidding war with Walldorf, Germany-based SAP in March, and ProfitLogic Inc. in mid-July.
Oracle is also acquiring some technology assets from Context Media Inc., a Providence, RI., content integration software developer. As part of the deal, some Context employees will be following the technology over to Oracle. The technology and personnel assets will help Oracle build in its hub concept of offering vertically aligned, searchable repositories.
With Oracle on a buying spree, some industry observers question whether the acquisitions will help.
"Oracle is adding a significant burden by doing this comprehensive [acquisition] strategy, and there are going to be some integration issues," said Joshua Greenbaum, principal at Enterprise Applications Consulting, in Berkeley, Calif. "They are buying companies that have existing synergy with Oracle."
I-flex, for its part, is no stranger to Oracle. The two companies have had a nearly decade-long relationship; I-flex began optimizing its suite of software for Oracles technology platform in 1997. More than 90 percent of I-flex customers currently run on Oracles stack, according to Oracle.
Given I-flexs apparent success, Oracle plans to keep the company running in its current mode. The management team will remain intact but align product development, sales, marketing and services with Oracles approach.
Oracles co-president Charles Phillips will take a seat on I-flexs board of directors.
"The inevitable transition from legacy systems to modern applications has created a multi-billion dollar opportunity," Phillips said in a statement. "Because no single supplier has been able to meet customer needs, the banking software market is highly fragmented. Customers have been looking for a Tier 1 software partner to help modernize their systems and lower their maintenance costs."
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