Coforge Acquires Encora AI in $235 Million Stock Deal
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Coforge to Acquire Encora for $2.35 Billion in Landmark IT Deal
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Published: November 26, 2023
Deal Overview
Midcap information technology (IT) services company Coforge announced on November 26, 2023, its acquisition of Silicon Valley-based artificial intelligence (AI) firm Encora for $2.35 billion in an all-stock transaction.Livemint reports this is the largest takeover by an Indian IT company in the engineering research and development (ER&D) segment.
The deal ranks as the fourth-largest ER&D transaction globally and the second-largest acquisition ever undertaken by an Indian IT services company, according to The Economic Times. The acquisition is expected to bolster Coforge’s AI capabilities and expand its global reach.
Transaction Details
Coforge, headquartered in Noida, India, will acquire Encora from its current shareholders: Advent International, Warburg Pincus, and other minority investors.Business standard details that the $1.89 billion equity value will be funded through a preferential allotment of shares priced at ₹1,815.91 each, representing a 14.5% premium over the closing price on November 24, 2023.
Encora’s existing shareholders will collectively hold a 20% stake in the combined entity. The investors will also gain representation on Coforge’s board, with the right to appoint two nominee directors and participate in key board committees.
Financial Projections and Synergies
The combined company is projected to achieve an Earnings Before Interest and Taxes (EBIT) margin of 14%.Coforge anticipates the acquisition will be earnings-per-share (EPS) accretive by fiscal year 2026-27.
Encora, specializing in AI-driven engineering supported by cloud and data solutions, forecasts revenue of $600 million for fiscal year 2026, with an adjusted EBITDA margin of approximately 19%. This projection, as reported by The Financial Express,highlights the potential for significant revenue growth and profitability for the combined entity.