Longtop Financial Technologies Limited ("Longtop") (NYSE: LFT), a leading software developer and solutions provider targeting the financial services industry in China, today announced that the Company has entered into a definitive agreement to acquire for cash 100% of Giantstone Information & Technology Ltd., a leading core banking solution provider in China.
The acquisition is expected to close prior to March 31, 2010, and is expected to be earnings accretive for the fiscal year ended March 31, 2011.
Founded in 2000 and exclusively focused on core banking, Giantstone primarily provides implementation, customization, consulting as well as maintenance services to a leading national joint stock commercial bank. This leading national joint stock commercial bank is replacing its existing core banking systems with a global software company's core banking system as well as various applications being developed by domestic vendors including Giantstone. Giantstone also has its own proprietary core banking product that in future will be targeted at smaller banks in China. Giantstone has over 300 employees, most of whom are engineers dedicated to core banking project delivery as well as research and development.
"We believe one of the keys to successful core banking implementations in China is domestic knowledge which the Giantstone management team, one of the most experienced in China's banking industry, brings to Longtop. Over the next ten years, we believe the national commercial, regional, larger city banks and smaller banks in China will accelerate their investment in upgrading or replacing their existing core banking systems. The acquisition of Giantstone fills one of the main gaps we had in our product portfolio and will allow us to capitalize on the core banking opportunity in the non-Big Four Bank customer segment, which now accounts for 35 to 40% of our software development revenues. Our core banking competency will also open up new cross-sell opportunities for our existing solutions such as BI and risk management applications. Furthermore, Giantstone's proprietary core banking solution aimed at smaller banks will also potentially open up a new customer segment," said Weizhou Lian, Chief Executive Officer of Longtop.
According to the market research firm IDC, core banking systems became the "largest IT investment category" in 2008 with a total market size of US$176 million, and over 20%, of the total banking IT solution market. IDC expects demand for core banking systems to grow at a compounded annual growth rate of 17% from 2009 to 2013 to reach US$397 million in 2013.