The DWS Ltd (ASX: DWS) share price is off to the races today, soaring 31%. The surge in the DWS share price follows this morning's announcement that the company will be acquired by global giant HCL Technologies Ltd.
Today's huge leap sees DWS shareholders handily in the green for 2020, with the share price up 9% year to date. Savvy (or lucky) investors who bought DWS shares at the 24 March lows are enjoying gains of 115%.
By contrast, the All Ordinaries Index (ASX: XAO) is down 12% so far this year.
We'll look at the details of the acquisition offer in a tick, but first…
What do DWS and HCL do?
DWS was founded in 1991 by its current CEO, Danny Wallis. Shares first started trading on the ASX in June 2006. The company provides a range of IT services including consulting for custom application development, digital solutions and project management. FY20 revenue came in at $167.9 million.
Operating out of 49 countries, HCL Technologies works to deliver companies the technology they need for the decade ahead. The company offers its services and products through three business units: IT and Business Services (ITBS); Engineering and R&D Services (ERS); and Products & Platforms (P&P). For the financial year ending 30 June, HCL had consolidated revenue of US$9.93 billion (AU$13.6 billion) and as of this morning had a market capitalisation of US$29 billion.
What is HCL offering DWS shareholders?
HCL is offering to buy 100% of the DWS shares by way of a scheme of arrangement. Shareholders will receive a total cash consideration of $1.20 per share plus 3 cents per share dividend. If shareholders approve of the deal (and it passes the needed regulatory hurdles) DWS will become a wholly owned subsidiary of HCL.
DWS plans to make use of HCL's global resources and expertise to offer expanded platforms to its Australian customer base.
The implied price of $1.23 per share still exceeds the current $1.18 cents per share even after this morning's 31% surge.
Danny Wallis, CEO and Managing Director, DWS said:
We are delighted the DWS team is joining HCL. As a leading name in the global technology industry and with over 150,000 employees across 49 countries, they bring best in class technology capabilities, global scale and a wide network of clients and partners across industries. This acquisition represents an outstanding outcome for all DWS stakeholders: shareholders, employees, clients and other business partners.
Michael Horton, Executive Vice President & Country Manager, Australia & New Zealand, HCL Technologies added:
We are excited for this expansion of HCL Technologies in Australia and New Zealand and are confident that our combined strengths will further accelerate the digital transformation journeys of our clients and innovations for their end customers. HCL has invested in the region for over 20 years and is committed to enabling digitilisation and growing the local ecosystem. DWS has forged a sterling reputation, powered by highly talented consultants who enable organizations to be at the cutting edge of technology.
