Capgem­ini to buy IGATE in US$4 bil­lion US ex­pan­sion


French IT ser­vices and con­sult­ing com­pany Capgem­ini said Mon­day it was buy­ing New Jersey­based IGATE for US$4 bil­lion (3.7 bil­lion eu­ros), boost­ing its U.S.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 in­dus­tri­al­iza­tion jour­ney to of­fer ever more com­pet­i­tive ser­vices to our clients,” said Capgem­ini pres­i­dent Paul Her­melin in a state­ment.



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 US$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 U.S. clients and an­other 27,000 are based in In­dia.

Capgem­ini will pur­chase IGATE stock at US$48 per share — 5 per- cent 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 fi­nal­ized dur­ing the sec­ond half of the year, and is ex­pected to cre­ate an­nual syn­er­gies of US$100-150 mil­lion, and cost re­duc­tions of US$ 75- 105 mil­lion, Capgem­ini said.

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

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