DWS (ASX:DWS) share price rockets 31% on HCL acquisition deal

Shareholders will be celebrating tonight after the DWS share price surged on news that HCL Technologies intends to acquire the company.

businessman riding rocket on line graph

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »

Father in the ocean with his daughters, symbolising passive income.
Dividend Investing

I'd spend $8k on these ASX 200 shares today to target a $6,102 annual passive income

I believe these ASX 200 shares will continue rewarding passive income investors for years to come.

Read more »

Three businesspeople leap high with the CBD in the background.
Share Market News

Boom! ASX 200 blasts to new record highs

ASX 200 investors just sent the benchmark index into uncharted territory.

Read more »