[News Item from BusinessWire] Indus International, Inc. (NASDAQ: IINT), a leading provider of enterprise asset management solutions, announced it has entered into a definitive agreement to Acquire the Global Energy and Utility Solutions (GEUS) business unit of Systems & Computer Technology Corporation (NASDAQ: SCTC).

Analysis: While the last twelve months have been a quiet year for mergers and acquisitions in the utility industry, the same cannot be said with regards to the information technology firms that serve the industry. This latest announcement from Indus and SCT is just the latest in a long line of similar combinations.

The acquisitions are not surprising given the current market situation. The slowdown of deregulation in North America, combined with the earnings pressures being felt by most utilities, has led many companies to postpone their purchases from information technology vendors. What is surprising about the acquisitions is that in many cases, the companies being acquired are receiving a significant premium. Let's take a closer look at some of the acquisitions, and the Indus acquisition of SCT in particular.

ADS
One of the most acquisitive companies in the energy information technology sector has been Dallas-based Alliance Data Systems (NYSE: ADS). Alliance Data Systems (ADS) is a provider of transaction services, credit services and marketing services in North America. ADS focuses on facilitating and managing electronic transactions between clients and their customers. ADS does not the serve the energy industry exclusively. The company has a client base of over 300 companies, consisting of specialty retailers, supermarkets, and financial services companies.

In 2001, ADS acquired the operating assets of Utilipro, Inc., a subsidiary of AGL Resources, Inc. Utilipro provided account processing and servicing to the de-regulated utility sector. Utilipro provided these services to three clients serving approximately 500,000 utility customers.

In 2001, ADS also entered into a strategic relationship under which the company provides data processing and billing services for Puget Sound Energy. As part of the strategic relationship, ADS acquired the assets of ConneXt, Inc., including use of the company's ConsumerLinX software.

ADS' most recent purchase occurred in September of 2002 when the company acquired Enlogix Group, formerly wholly owned subsidiaries of Duke Energy Corporation. Enlogix provides customer information services to utilities in Canada. The purchase price for the acquisition was $13.5 million (USD). ADS expects the acquisition of the billing and customer information service provider to add revenue of at least $10 million (USD) annually from the existing core client base. With the acquisition, ADS began providing customer information system hosting for five utilities, including Duke Energy units Union Gas and Pacific Northern Gas.

Itron
Itron is another company that has been on a significant acquisition spree. Itron is a technology provider to the energy and water industry for collecting, analyzing, and applying data about electric, gas, and water usage. First launched as a subsidiary of Washington Water Power (now Avista), Itron is now a publicly traded company (Nasdaq: ITRI) with a market capitalization of approximately $370 million. Itron has made four acquisitions over the last twelve months.

Silcon Energy represents Itron's latest acquisition. Last month Itron signed a definitive merger agreement to Acquire Silicon Energy for $71.2 million, approximately 3.5 times Silcon Energy's revenues in 2002. Silicon Energy provides enterprise energy management solutions that help clients to better manage and apply energy consumption data, optimize the delivery and use of energy, mitigate risk, and procure energy. Silicon Energy's software also better enables utilities to streamline the process of collecting, validating, and warehousing meter information; calculate and validate bills; and manage peak demand.

In September Itron paid $14 million for Regional Economic Research, Inc. (RER). The company provides forecasting services and software products to assist system operations, scheduling, risk management and financial performance. RER also provides consulting and analysis services including planning and evaluation of energy efficiency programs, renewable energy projects, distributed generation programs, analysis of energy usage patterns (including load research and load profile development), and consulting regarding retail competition.

September also saw Itron announce an agreement to Acquire eMobile Data Corporation for $6.2 million in cash. eMobile Data is a provider of wireless, Web-based workforce management solutions for the utility industry. At the time Itron said that its utility clients have told the company that streamlining and enhancing the productivity of field workforce operations represents an area of significant need within their organizations. As a result, by acquiring eMobile Data, Itron felt it was demonstrating a lasting commitment to delivering the knowledge its utility clients require.

Prior to that acquisition, Itron acquired LineSoft Corporation for $42 million in cash and stock. LineSoft provides engineering design software applications and consulting services to the utility industry since 1988. LineSoft's products and services include software and software services for the design, construction, and maintenance of transmission and distribution lines and distribution substations, including new construction, upgrades and maintenance. LineSoft has more than 130 customers in 14 countries around the world. The company generated approximately $14 million in revenue in 2001, and had been growing revenue in excess of 50% since 1999.

Indus & SCT
Indus' acquisition is the latest transaction in the energy information technology sector. Indus develops, markets, implements and supports integrated Enterprise Asset Management (EAM) and supply chain software and service products for capital-intensive industries, utilities included. Indus' three principal software products are PassPort, EMPAC and Indus InSite, which is offered as a hosted product. These products are implemented by a Professional Services organization and supported by a Worldwide Customer Service organization. The company derives its revenues from software licensing fees, implementation and training services, maintenance fees, and hosting services.

SCT's Banner Customer Management System is likely the most widely used customer information system (CIS) in the utility industry. It claims to be the predominant provider of customer billing system solutions to the energy market, boasting over one hundred electric, water, and gas utilities using its products to support more than 92 million utilities accounts worldwide, and generate over 38 million utility services bills each month.

Indus and SCT hope that an integrated solution will positively impact both operations and provide new value to utilities. Indus has agreed to pay $39 million, subject to adjustment based on the working capital of the business at closing. Revenues from the GEUS business were $14.9 and $19.5 million for the three-month periods ending December 31, 2002 and 2001, respectively.

UtiliPoint has learned that during the bidding process, a higher offer than the one presented by Indus was made to SCT, but the company declined. SCT may have found the higher offer less attractive because it saw the bidding company as a direct competitor, and as a result, could envision large layoffs of SCT's employees.

An underlying trend of most of the mergers and acquisitions that are occurring is that they tend to focus on broadening the market for the acquirer. In some cases, this broadening is geographic in nature. An example of this would be ADS' purchase of Enlogix, and how it allowed ADS to quickly enter the Canadian market in a big way. In other cases this broadening occurs by creating cross-selling opportunities. A good example of this would be Indus' acquisition of SCT's GEUS business unit. The acquisition will present Indus the opportunity to sell its products to the existing SCT client base, and vice versa.

Given the sluggish nature of the energy information technology market, I expect that mergers and acquisitions for this sector will flourish.