Oracle Corp. on Tuesday said it was taking a majority stake in an Indian firm specializing in financial software whose product is being deployed by one of Canada’s largest banks.

In a deal that could be worth more than US$300

million, Oracle will make an open offer on Wednesday to the remaining shareholders of i-Flex Solutions of Bangalore, in accordance with Indian law. The agreement will see Oracle acquire 41 per cent ownership from CitiGroup, which spun off i-Flex in 1992. Executives said the deal is expected to close by the end of the year.

Oracle president Chuck Phillips said the acquisition represents the second phase of the business software maker’s growth strategy, in which it develops more products and services along vertical market lines. Oracle recently purchased Retek, for example, which focused primarily on creating tools for retail organizations. Phillips said Oracle believes it has already overcome the more important hurdle of growing large enough to earn the confidence of corporate customers, which was accomplished in part through its hostile takeover of PeopleSoft last year.

Best known for its FlexCube portfolio of core banking systems, i-Flex products are being deployed by CitiGroup in more than 50 countries, according to its chairman, Rajesh Huuko. Almost 90 per cent of i-Flex customers use Oracle as a fundamental toolkit and database, he said.

Phillips said Oracle plans no organizational changes at i-Flex, in part because the financial services expertise of its staff is seen as key to winning over banking customers. 

“This is one the first industries to automate. They have a lot of legacy systems,” Phillips said. “These are some very conservative buyers, but with Oracle’s size, plus the fact that they already know us, we’ve answered the viability issue.”

The two firms share at least one Canadian customer in the Bank of Montreal (BMO), which in April said it i-Flex’s Reveleus software to comply with Basel II, an emerging standard by which banks around the world will manage risk, by the end of the year. BMO already uses Oracle’s 11i E-Business Suite to manage some of its purchasing processes. In a conference call to discuss its quarterly results last year, i-Flex executives called the BMO deal a significant step towards entering the Canadian market, and described it as being worth more than $1 million.

Hukku said access to Oracle’s customer list offered a huge growth opportunity for i-Flex, and created a more comprehensive road map for financial services firms.

“This could have the potential to become the Tier 1 solution for the challenges that face the banking industry,” said Hukku, who added that i-Flex and Oracle are setting up a  joint committee to manage their relationship.

Phillips said i-Flex has been widely used with IBM hardware and software, and that Oracle would continue to work with Big Blue’s Global Services team on support issues.

Other recent Oracle acquisitions include Oblix, which has expertise in identity management software, and ProfitLogic, another retail software maker. Oracle intends to hold a “town hall” teleconference to discuss the ProfitLogic integration on Thursday.

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