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Krishnan Thiagarajan

SSI had entered into a share purchase agreement with the promoter group of Aptech — comprising Advent Tele Net Pvt. Ltd, Norfolk Infotech Pvt. Ltd, Mrs Alka Atul Nishar and Ms Priyanka Atul Nisharto — to acquire 27.18 per cent equity stake in the latter at Rs 49.75 per share in cash. Following this agreement, SSI is now making an open offer to acquire an additional 20 per cent equity from the shareholders of Aptech at an offer price of Rs. 49.75 per share. SSI will require around Rs 18.40 crore for this open offer. This will be in addition to the around Rs 25 crore paid by SSI to pick up the original 27.18 per cent equity stake in Aptech. No company has made a competitive bid for Aptech, the last date for the same was March 7.

SSI is likely to derive a three-fold benefit from this deal. First, it will be able to fill strategic gaps in its computer education and training portfolio, especially by offering long-term programmes.

Second, SSI can leverage on Aptech's international presence to expand its presence overseas. Since Aptech has nearly 260 centres abroad (with around 92 centres in China alone through a joint venture), SSI can use these to launch its short-term programmes overseas. Finally, SSI has been planning to separate its education and training division, and consulting and software services division into two companies. The deal with Aptech will enable SSI separate the two divisions.

Having said that, the computer education and training business has been shrinking rapidly and continues to be in a state of flux. For instance, this market is estimated to have shrunk by 40 per cent between 2001 and 2002. Any recovery of the education business seems at least a year away.

All the synergies from this deal hinge on SSI managing the integration prudently. The integration challenge will range from management of franchisees, getting rid of duplication along the entire education chain and selling SSI and Aptech as a composite brand in the long run.

Moreover, the offer price of Rs 49.75 is at an attractive premium of 52-54 per cent to the two-week and 26-week average prices at the National Stock Exchange. Aptech shareholders can take advantage by tendering to the open offer. The offer opened on April 3 and closes on May 2. The manager to the offer is JM Morgan Stanley.

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