France’s Capgemini to buy US outsourcer IGATE for $4 billion
French IT services firm Capgemini on Monday said it will acquire US-based outsourcer IGATE for $4 billion, a move that will help the former strengthen its foothold in the North American market.
Under the merger agreement, Capgemini will acquire the Nasdaq-listed firm for a cash consideration of $48 per share and the transaction will amount to $4 billion, Capgemini said in a statement. The combined revenue of the merged company is estimated at 12.5 billion euros in 2015 and around 1.9 lakh employees.
Interestingly, IGATE had bought India’s Patni Computer Systems in 2011 in partnership with private equity giant Apax Partners in a $1.2 billion deal. In November, Apax converted its debt in the company into equity and made a filing with the US Securities and Exchange Commission to have the option to sell its entire stake. This transaction, which is expected to close in the second half of 2015, will be financed through a combination of cash and equity. Capgemini said the transaction fulfils one of the essential components of its strategy in expanding its presence in the North American market.
The new organisation will be in place within three months of closing and the integration is expected to be completed within nine months. “It will give us a new status on the American market...This will also give to the Group’s Indian operations a new scale, allowing us to compete on par with the best US-based and Indian-based companies,” Capgemini Chairman and CEO Paul Hermelin said. The combination of IGATE and Capgemini increases the Group’s revenues in the region by 33 per cent to an estimated $4 billion, making North America its first market with about 30 per cent of the pro-forma combined revenues in 2015.
An estimated 50,000 employees will be servicing Capgemini’s North American clients. “We are gratified that the company we founded over 25 years ago has developed into a global enterprise with over 30,000 employees, a trusted partner to over 250 clients, a market value of over $4 billion, and one of the most respected brands in the IT industry,” IGATE Co-Founder and Co-Chairman Sunil Wadhwani said. The acquisition will also strengthen Capgemini’s key businesses in application and infrastructure services as well as BPO and engineering services,” the statement added.
It will also bring on board flagship clients like General Electric and Royal Bank of Canada for Capgemini. The deal is expected to be immediately accretive to Capgemini’s normalised Earnings Per Share (EPS), it added. The agreement has been approved by both Capgemini and IGATE’s Board of Directors. The transaction has also been approved by the written consent of shareholders holding a majority of IGATE’s shares. Headquartered in New Jersey, US, IGATE reported revenues of $1.3 billion in 2014. Its largest market is North America, which represented 79 per cent of revenues, followed by Europe (14 per cent) and Asia-Pacific (7 per cent).