Syndesis Strikes $165M Takeover

Indian revenue assurance specialist Subex Ltd. has struck a preliminary agreement to buy Canadian OSS vendor Syndesis Ltd. in a cash deal worth $164.5 million.

Subex Azure said this morning it "has entered into a conditional contract" to buy Syndesis. "If completed, this acquisition will be a significant milestone in Subex Azure’s drive to become the leading global vendor of telecom OSS solutions."

Subex Azure's share price gained 19.55 Indian Rupees (US$0.44), nearly 2.7 percent, to hit Rs751.8 ($17.03) on the Bombay Stock Exchange following the announcement.

Industry speculation suggests that Syndesis began looking for a buyer soon after Amdocs Ltd. (NYSE: DOX) acquired inventory management player Cramer Systems Ltd. , a Syndesis partner, in a $375 million deal in July 2006. (See Amdocs Snaps Up Cramer.)

Now Syndesis -- which is best known for its IP provisioning tools but also peddles resource management, order management, data integrity, and activation software -- has found a new home. (See Who Makes What: OSS and Syndesis Expands OSS.)

But while news that Syndesis is being acquired might not shock very many in the telecom software world, Subex Azure's involvement will raise a few eyebrows. Much of the OSS sector's recent acquisition activity has involved either Amdocs, IBM Corp. (NYSE: IBM), or Oracle Corp. (Nasdaq: ORCL), and industry sources expect those giants to continue their inorganic growth. (See M&A Reshapes OSS Sector, Amdocs Continues Spending Spree, IBM Buys Another OSS Firm, and Oracle Buys More OSS With MetaSolv.)

Subex Azure, a profitable company that generates revenues of more than $20 million a quarter, has so far restricted itself to consolidating the revenue assurance sector, with Azure doing much of the M&A work before it merged with Subex Systems in April last year. (See Subex Azure Reports Q2, Subex Azure Boasts Growth, Packet Design Signs Reseller, Azure Aquires Anite, Azure Acquires Connexn Technologies, and Azure Takes New Route.)

Now it's branching out. In a statement on the company's Website, it says it has "identified a compelling opportunity to replicate its current success by extending its offering to the fulfillment and assurance solution segment through the acquisition of Syndesis, a leading vendor in this segment. We expect this major acquisition to add significant value for our shareholders.”

Syndesis has a number of major carrier customers and trailing twelve-month revenues of $45 million. (See TI Sparkle Uses OSS, Syndesis Wins at Telstra, Syndesis Wins Record Deal , Syndesis Lauds OSS Deals, and Syndesis Lands Monster OSS Deal.)

It has more than 300 staff, and has raised more than $50 million from investors including Greylock Partners , Pequot Capital Management Inc. , Sequoia Capital , and VenGrowth Investment Fund Inc.

The Indian vendor expects the deal to close by the end of March, after which it plans to reorganize itself into three Strategic Business Units: Revenue Maximization Solutions, which will comprise its current core business; Fulfillment & Assurance Solutions, which will house the Syndesis business; and BT Business, which will handle the vendor's relationship with BT Group plc (NYSE: BT; London: BTA) -- a longtime revenue assurance customer that chose Syndesis to supply a data integrity solution for its 21CN project. Azure was spun out of BT in 2003. (See Azure Wins BT Deal, BT Selects Syndesis, and BT Boasts of Spinouts.)

— Ray Le Maistre, International News Editor, Light Reading