Capgemini to buy IGATE in $4bn US expansion push

French IT services and consulting company Capgemini said Monday it was buying New Jersey-based IGATE for $4 billion (3.7 billion euros), boosting its US-generated business to 30 percent of its total activity.

"IGATE is a leading company that perfectly fits our strategic ambition. It will give us a new status on the American market, and take further our industrialisation journey to offer ever more competitive services to our clients," said Capgemini president Paul Hermelin in a statement.

Hermelin said the combined companies would post 12.5 billion euros in annual revenues, a third of which would be generated in North America, which he called the "largest and most innovative market for IT services... (and) by far the first market of the Group."

In a conference call with reporters, Hermelin noted that in considering various acquisition options, Capgemini had "above all looked for a company that would allow us to reinforce geographically in the United States" -- something IGATE does by generating nearly 80 percent of its annual $1.3 billion in revenues in North America.

The purchase, which has been approved by the boards of both companies, also brings IGATE clients, including General Electric and the Bank of Canada, into Capgemini's stable.

IGATE, an applications, network and business process outsourcing specialist, will also help to expand Capgemini's position in the healthcare, retail and manufacturing markets.

The link-up will create a combined workforce of 190,000 employees, of which around 50,000 service US clients and another 27,000 are based in India.

Capgemini will purchase IGATE stock at $48 per share -- five percent higher than its NASDAQ close Friday -- and will be partially financed with cash.

Remaining funding will come from a capital increase that Hermelin said would decrease the value of existing Capgemini shares by no more than six percent, as well as debt.

The acquisition should be finalised during the second half of the year, and is expected to create annual synergies of 100-150 million dollars, and cost reductions of 75-105 million dollars, Capgemini said.

News of the move sent Capgemini stock up three percent at the opening of the Paris Bourse.
Source: AFP