VanceInfo Technologies Inc. (VIT) said it signed a definitive merger agreement with hiSoft Technology International Ltd. (HSFT), under which the companies will be combined in a tax-free, all-stock merger of equals with a combined equity value of about $875 million. Under the terms of the agreement, VanceInfo and hiSoft shareholders will each own approximately 50% of the combined company.
hiSoft will be the surviving listed company in the merger, and its shares will continue to be listed on the NASDAQ Global Select Market. A new name for the combined company will be announced in due course.
As per the agreement, each outstanding ordinary share of VanceInfo will be exchanged for the right to receive one common share of hiSoft, and each American Depositary Share of VanceInfo, each of which represents one VanceInfo ordinary share, will be exchanged for the right to receive one American Depositary Share of hiSoft.
The companies have identified potential cost synergies, which are expected to reach 2% of combined revenues within 18 months after the closing of the transaction. The parties are developing a defined execution plan and anticipate that the transaction will be accretive within the first 12 months following the consummation of the merger.
The deal is expected to close in the fourth quarter of 2012.
Separately, VanceInfo Technologies reported second-quarter profit of $4.68 million or $0.11 per share versus $7.14 million or $0.16 per share a year ago.
Adjusted earnings per share dropped to $0.19 from $0.21 in the same quarter a year ago. On average, 7 analysts polled by Thomson Reuters expected the company to report earnings of $0.20 per share. Analysts' estimates typically exclude special items.
Net revenues grew to $94.74 million from $68.25 million in the prior-year quarter. Analysts expected revenues of $91.29 million. The increase in net revenues was attributable to the demand from most of the markets the company serves, except for the European market.
Moving ahead, for the third quarter, the company projects net revenues to be between $95 million and $97 million, representing an increase between 35% and 38% from the corresponding period in 2011. Adjusted earnings per share is expected to be between $0.18 and $0.20. Analysts expect earnings of $0.25 per share, on revenues of $93.72 million.
For the full year of 2012, the company raised its guidance and now expects net revenues to be between $372 million and $376 million, representing a growth between 31% and 33% from 2011.
The company revised its adjusted earnings per share guidance to $0.75 to $0.81, excluding the merger transaction costs. Analysts expect earnings of $0.87 per share, on revenues of $369.17 million.
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