Big deal

New Delhi, April 17: In one of the biggest leveraged buyouts in the country, private equity firm Kohlberg Kravis Roberts & Co (KKR) today acquired an 85 per cent stake in Flextronics Software Systems in a $900-million deal.

Flextronics will retain 15 per cent of the equity. The existing management team will continue to lead the software business.

Once the deal is closed, Flextronics expects to receive $600 million in cash and will hold a $250-million face value note with a 10.5 per cent paid-in kind interest coupon which matures in eight years. Flextronics has over 6,100 employees world-wide. ?The transaction is subject to regulatory approvals and customary closing conditions and, therefore, is expected to be completed by the summer of 2006,? said Ash Bhardwaj, chief executive officer of software development and solutions business.

?This is a positive development for our customers, employees and stakeholders,? he added.

Bhardwaj said after the deal was closed, Flextronics would also have generated more than $1 billion in cash through the divestitures of software, network services and semiconductor businesses.

This is KKR?s first buyout in India and second investment in Asia following its 2005 investment in Avago Technologies, the former semiconductor-products group of Agilent Technologies Inc.

KKR will finance the acquisition with fully underwritten debt facilities. Citigroup and Merrill Lynch acted as financial advisers to KKR.

One of the oldest private equity firms, KKR has completed 140 transactions involving finances over $193 billion.

The Indian unit of Flextronics was formerly known as Hughes Software Systems, based in New Delhi, before Flextronics acquired it.

In June 2004, Flextronics bought 55 per cent of Hughes for $226 million and renamed the company after increasing its stake.

Some of the software companies in India that Flextronics acquired were FutureSoft, AUCT, Azisa, DeccaNet, Avivsoft and Emuzed. Frog Design was the only one it acquired in product designing.

Flextronics Software has a centre in Bangalore focusing on development of software for the Internet and has about 600 employees on its rolls.