OREANDA-NEWS. OAO Armada (MICEX, RTS: ARMD) announces that it has acquired 55% of shares in ZAO Soyuzinform, one of the leading companies on the Russian IT outsourcing market. This acquisition gives Armada access to a market that is growing approximately 40% a year.

Outsourcing, or contracting an outside firm to handle the company’s business processes, is a very popular service in international business practices. The majority of Fortune 500 companies have been known to outsource services on a regular basis, in an effort to free their own resources and focus on core activities.

According to Gartner forecasts, the IT outsourcing market in Europe, Middle East and Africa will reach $90.9bn in 2009. However, Russia's specific and big advantage is that its IT market is growing at a rate six times faster than the global one. In Western economies, this market expands 6.8% a year, while IDC analysts forecast a sustainable growth of as much as 40% in Russia. IT outsourcing is only part of a larger IT services sector. In Western Europe, this sector accounts for 55% of the IT market, compared with 20% in Russia. Meanwhile, Russia’s IT services sector has been increasing 25% a year, well above the average growth of 18% observed on the total IT market in Russia.

Established in 1996, Soyuzinform is a pioneer of the Russian IT outsourcing market. Its revenue is expected to top $20m in 2007 and continue to grow by at least 25% a year. The company’s main revenue streams come from support and development of customers’ IT infrastructure and software solutions. In 2006, Soyuzinform generated about $4.5m in net profit with the net profit margin of around 25%

Soyuzinform has become Armada’s first acquisition financed with proceeds from its successful IPO held in July 2007. Prior to the IPO, Armada purchased PM Expert, a project management company, in June 2007. These two acquisitions testify to Armada’s strong ambition to consolidate high-margin businesses in the Russian IT market’s fast-growing sectors.

Armada CEO Alexei Kuzovkin said, “The acquisition of Soyuzinform has become an important step forward towards the implementation of Armada’s aggressive growth strategy, for which we raised funds at the IPO. The purchase was paid in cash based on a P/E ratio of 5, which amounted to $12.3m for 55% of shares. We have also reserved an option to buy the remaining 45% from Soyuzinform’s owners, who are at the same time its top managers. Under the option agreement, the remaining shares in Soyuzinform can be exchanged for Armada’s shares on a stepwise basis, provided that Soyuzinform meets revenue growth targets, keeping its margins sustainable for the next few years.”

Commenting on the major reasons for the transaction, General Director of Soyuzinform Maxim Selivanov said: “Soyuzinform's expertise and solutions are complementary to those of Armada, and we expect a strong synergetic effect. Soyuzinform has already secured several new contracts via cross-selling with Armada, and we expect the number of such orders to increase.”