Visualsoft drops merger moves with Applabs and eSolutions

Our Corporate Bureau
20 March 2006

IT services company Visualsoft Technologies has decided not to pursue the proposed 3-way merger with Applabs Technologies Private Limited and eSolutions Private Limited. The company cited delays in getting regulatory approval as the reason for dropping the merger plans.

Visualsoft said delays in getting the approvals will not benefit the planned synergised growth of the merged entity. The company has not disclosed the nature of approvals which were getting delayed or the reasons for the delay.

The merger proposal had met with some opposition from the existing shareholders of Visualsoft because of the high valuations for the two companies being merged with it. Opposition from existing shareholders would have made it difficult for the company to get High Court approval for the merger.

Applabs is into software testing services while eSolutions focuses on outsourced software product development. Visualsoft, which is one of bigger Indian software companies in the product development space, had proposed to realign its business to focus on product development and software testing after the merger.

Visualsoft first announced the merger in October 2005 and the board had approved a scheme of amalgamation in December. Shareholders of Applabs and eSolutions were to get equity shares in Visualsoft, proportionate to their holdings in the two companies.

The merged entity would have had around 1800 employees and was targeting profits of Rs70 crore on revenues of Rs400 crore for the financial year 2006-07.