A fast-growing business with a robust operating profile, SLK Global has deep domain expertise in the banking and insurance segments in North America. It enjoys multiple long-standing and scalable relationships with marquee clients with strong growth potential, including with Fifth Third Bank, N. A., which in addition to being the largest customer, is also a significant minority shareholder. It has also created a suite of platform solutions that provide a differentiation to its clients.
The transaction is being funded by Coforge with a combination of internal accruals and external borrowings. Coforge shall initially acquire 60% stake in SLK Global, with SLK Globals founders completely exiting. Aggregate consideration paid by the company for the acquisition of 60% of the total issued and paid up share capital of SLK Global is Rs 918.321 crore.
Fifth Third Banks stake in the company will be reduced to 40% and shall continue at that level for the next 2 years. Coforge will acquire an additional 20% stake from Fifth Third Bank after the completion of 2 years. As part of the transaction, Fifth Third Bank has committed to remaining a significant customer of SLK Global and has also committed a base volume over 5 years starting FY22.
SLK Global reported consolidated revenue of $62 million during FY20 and is expected to report consolidated revenue of $73 million during FY21, representing a growth of about 15% despite the impact of COVID-19. The business has registered a three-year revenue CAGR of over 17%. It is a highly profitable business and will be EBITDA margin accretive to Coforge.
Separately, the company informed that a meeting of the board will be held on 17 April 2021, to consider and approve raising of funds by way of issuance of non-convertible bonds on private placement basis.
Coforge is a leading global IT solutions organization. The scrip fell 1.24% to currently trade at Rs 3129 on the BSE.
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