PARIS: Cap Gemini SA, a French information technology services company, said it will buy US-based rival IGATE Corp for $4bn in a deal that would make North America into its biggest market and hand IGATE’s founders a $1bn windfall.
Cap Gemini also raised its 2015 sales forecast in a statement that was pushed up to coincide with the announcement of the deal. Its shares climbed nearly 8 percent.
IGATE, which has strength in the financial services sector, has grown quickly since its 1996 stock market listing. Cap Gemini said IGATE has been recording double-digit growth and a 19 percent operating margin. Its 2014 revenue was $1.3bn.
The acquisition would significantly bolster the French company’s presence in North America.
IGATE does about 80 percent of its business in North America, and would represent 30 percent of the combined group’s estimated 2015 revenue of €12.5bn ($13.58bn).
The deal would enhance earnings by 12 percent in 2016 and 16 percent in 2017, according to Cap Gemini. The combined group’s operating margin would be above 10 percent.
Cap Gemini, whose market capitalisation was about €13bn ($14bn) at the close of business on Friday, said it would pay $48 a share for IGATE. The US company’s shares added 3.5 percent to $47.45 yesterday.
Cap Gemini will finance the deal partly through about $1bn of its own cash, along with an equity portion that will not exceed a 6 percent dilution of the French company’s share capital. More than $2bn would be financed through debt. Cap Gemini said it had the backing of shareholders representing 54 percent of IGATE’s share capital.
Ashok Trivedi and Sunil Wadhwani, the Indian-American co-founders and co-chairmen of IGATE, own 12.81 percent and 12.99 percent, respectively, of the shares and could collect more than $1bn between them.
With the acquisition, Cap Gemini would add new clients such as General Electric Co and Royal Bank of Canada.
IGATE employs 33,000 people globally, with 75 percent of them in India. The combined company would have more than 100,000 employees there, or 48 percent of its workforce. In a separate statement, Cap Gemini said sales grew by 10.5 percent in the first quarter and raised its 2015 growth target to at least 5 percent from its previous forecast of between 3 percent and 5 percent.
The deal will require various regulatory approvals, and was expected to close in the second half of this year. Bank of America Corp advised IGATE while Lazard Ltd advised Cap Gemini on the transaction. Reuters
