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.