Mumbai: Shares of UK-based SAP consulting firm Axon Group Plc rose 21 per cent on the London Stock Exchange following rumours that a £407.1 million ($753 million) takeover offer by Infosys Technologies could face a counter bid. (See: Infosys to acquire UK's Axon for $753 million)

Axon's board had agreed to the Infosys offer but analysts said the offer could still go up, helping Axon's shares up 103½p, or 20.6 per cent, to 606p.

Infosys' cash offer values Axon at 600 pence a share, a 19.4-per cent premium over its Friday close of 502.5 pence. The offer also includes an interim dividend of 2-¼p the company declared following the offer.

A day after Infosys announced the offer, Axon also reported a 28 per cent year-on-year increase in its first half (January-June) revenue at £123.9 million, boosting the scrip further.

Infosys, on the other hand, gave up gains of more than 2 per cent and ended lower on Tuesday after a London-based securities house said it could face a counter bid to acquire Axon.

Some analysts even took the possible counter offer for Axon to 700p a share. In fact, Axion shares have fallen from highs of 982-½ last September on fears of an economic slowdown and capital spending cuts.

Axon founders who collectively hold nearly 18 per cent of the shares, including former executive chairman Mark Hunter with a 11.7-per cent stake, have given irrevocable undertakings to accept Infosys' offer even in the event of a higher offer.

The acquisition of Axon is part of Infosys' two-pronged strategy to derisk its business from a US slowdown while expanding its global footprint.

Axon focuses on large projects, with five largest customers accounting for 50 per cent of its revenues in the first half of this year. Axon has 15-20 per cent market share of SAP services in the UK and the rest of Europe. Its major clients include Vodafone, Barclays, British Petroleum, Pratt and Whitney, Cable and Wireless, PSC Energy, GE Capital, Motorola and Xerox, among others.

A deal with Infosys would extend Axon's global reach as well as services and resources base.

Axon CEO Steve Cardell admitted that the company had had ''several chats around the coffee machine'' with rivals, rumoured to be `Fujitsu', which had earlier made a 700p offer for Axon.

An Axon takeover will lift Infosys into the big league and enable it to bid for bigger projects.

''Apart from increasing our revenue from Europe, Axon will be a new engine for growth worldwide,'' Infosys CEO Gopalakrishnan said in an interview. ''The buyout will also enable us to pitch for large deals by cross-selling its domain expertise in SAP to our global clients,'' he added.

Post acquisition, the $4.4-billion software major plans to offer consulting services in the domestic market as well, using SAP as its strategic enterprise platform.

SAP currently accounts for 24 per cent of Infosys' enterprise solutions revenue, with a cumulative average growth rate (CAGR) of 65 per cent over the last three years.

It will also help Axion to use Infosys' US-based subsidiary to providing SAP consultancy across new markets.

Should Axon shareholders vote in favour of another buyer and the deal is completed before 31 January 2009, it would have to pay Infosys an inducement fee of one per cent of the consideration payable by Infosys for the Axon shares, the two companies said in a statement.

This fee would amount to approximately $4.07 million (Rs33 crore), given the size of the acquisition at $407 million.

The Axon bid comes nearly five years after Infosys first bought Australian IT services provider Expert Information Services for $22.9 million in December 2003. In July 2007, Infosys acquired the three business process outsourcing divisions of the Philips NV of the Netherlands for $28 million.

An acquisition of Axon will trim Infosys' war chest to around $1 billion from $1.8 billion. But, Infosys' chief financial officer V Balakrishnan said Axon's revenue could reflect in Infosys' fourth quarter (January-March) results.

Infosys plans to retain most of Axon employees, though at a higher cost than Infosys' staff.