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February 20, 1998

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Infosys acquisition plans stumped by strict deadline

Email this story to a friend. A strict deadline set by the government has prompted Infosys Technologies to seek an on-tap approval for its $50 million acquisition of a US based software company.

The government has given the company barely three months from the date of approval to complete all acquisition modalities.

"Three months is grossly inadequate to get approvals and complete all
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modalities involved in an acquisition. Which is why we have asked the government to give us an on-tap approval," Infosys sources said.

For the acquisition, which is planned to be a stock-swap buyout, clearances would have to be taken from many authorities, including the shareholders of the target company.

"As the acquisition will be for shares and not against cash, the process will take longer," said an Infosys source.

In this case, shareholders of the acquired US company will be given shares of Infosys at a predetermined ratio instead of cash.

Infosys had a couple of months ago decided to go in for the acquisition of a software company in the US for stocks. At the same time, the company had also decided to go in for a $75 million American depository receipt issue, $50 million employee stock option plan and a $100 million plan allowing foreign institutional investors to hold its stock in ADR form.

All these decisions were taken by Infosys in an effort to become a global software company with an Indian base. In addition, the company has decided to use the $75 million ADR proceeds for expansion, which involves the setting up of new software development facilities in the country and abroad.

According to sources, the government is yet to clear the company's other proposals pertaining to its ADR offering, employee stock option plan and the option to the foreign institutional investor of holding their investments in ADR form.

"We are hoping to hear from the government soon, at least about the $75 million ADR issue as these are usually cleared within 30 days. We have been waiting for close to two months," company sources complained.

- Compiled from the Indian media

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