Flextronics to Acquire 55% HSS Stakes

Singapore-based $14.5 billion electronics manufacturing services (EMS) provider Flextronics International Asia Pacific Ltd has signed a definitive agreement with Hughes Network Systems, a wholly-owned subsidiary of DirecTV, to acquire its entire ownership stake of fifty-five percent in Hughes Software Systems (HSS) at Rs 547 per share. 

The $226 million deal is subject to regulatory approval and is expected to close by October 2004. Pursuant to Indian securities regulations, Flextronics is required to make an open offer on or about 11 June 2004 to purchase an additional twenty percent of the shares outstanding from the remaining shareholders at a price not less than Rs 547. There is no obligation for shareholders to accept this open offer and there is no assurance that any shares will be offered for sale to
Flextronics.

The approximate total purchase price of $226 million to be paid to HNS, along with the open offer of $82 million, assuming an offer price of Rs 547, is required to be funded by Flextronics on the date the open offer is initiated.

HNS Mauritius Holdings and HNS Inc, the promoters of HSS executed share purchase agreement with Flextronics earlier today.

HSS provides convergent software solutions for fixed and mobile networks for both voice and data. Its products and services span a variety of domains, such as optical networks, wireless networks, and satellite networks, switching systems, convergent networks and broadband networks. HSS' product portfolio includes protocol stacks and value-added frameworks and are comprised of licensable technologies focused on voice over packets (VoP), SS7, broadband and wireless (GPRS/UMTS) products that provide customers with open architecture solutions. 

By partnering with HSS, Flextronics has become the first EMS provider to offer embedded and application software development for telecom infrastructure products and customers. Flextronics can now provide a complete outsourcing solution to telecom OEMs. 

"This partnership should offer significant opportunities to cross-sell our respective products and services to a very
complimentary telecom customer base," said Flextronics chief executive officer Michael E Marks in a press release.

According to him, the company is committed to expanding design services into every product area where it has manufacturing presence. "HSS will enable us to move quickly into the telecom infrastructure space. We are thrilled to have this opportunity," he added. 

Citigroup Global Markets, Inc and its affiliate Citigroup Global Markets India Pvt Ltd advised Flextronics, while The DirectTV Group and its subsidiaries were represented by DSP Merrill Lynch Limited.

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