Atos buys Syntel in $3.4-B US push for Amex, FedEx

ATOS SE agreed to buy Syntel, Inc. in a $3.4-billion cash deal to boost the French computer-services provider’s US access, to customers including financials like American Express Co. and State Street Corp.

At $41 a share, the transaction is also a way for acquisitive Atos to bounce back from a rebuffed bid 8 months ago on Gemalto NV, which secures digital payments for banks and other clients. The per-share figure is 4.8% more than Syntel’s closing price of $39.13 on July 20. The total price is $3.57 billion including Syntel debt, the companies said Sunday in a statement.

“We’ve just acquired a massive booster to our US business and to our digital business,” Atos Finance Chief Elie Girard said in a call with reporters on Monday. As a French company reinforcing its presence in the US, “we’re absolutely not worried about trade — our industry is not on the radar as a target of trade wars,” he said.

Shares in Atos rose as much as 3.5% in Paris trading.

Syntel’s top three customers American Express, State Street Bank and FedEx Corp. accounted for 45% of its revenue last year, and only about 11% of sales came from outside of North America, according to an annual report. While the company gets most of its revenue from the US, the bulk of its 23,000-person workforce is in India.

Atos said it expects the deal to close by year-end, adding to earnings immediately and providing “double-digit accretion as early as 2019” excluding transaction costs and goodwill. The boards of both companies approved the transaction on July 20 and Syntel shareholders holding 51% of the stock, including founders, pledged to vote in favor, according to a statement.

“We see potential for synergies on sales as well as margins,” Girard said. The acquisition price is about 14.7 times Syntel’s earnings before interest and taxes over the past 12 months, before taking synergies into account, he said.

While Atos’s market capitalization of €13.2 billion ($15.4 billion) is almost five times that of Syntel, the American company’s shares have been growing faster. Syntel shares have doubled in the past year, while Atos is little changed.

Atos on Monday also reported earnings for the second quarter and confirmed its full-year targets.

Syntel’s net revenue has dropped for the past two years, including a 4.4% decline to $923.8 million in 2017. The company has global development centers in India, Scotland, Poland and the Philippines, with 76% of its billable workforce located in India, according to Syntel’s annual report.

The transaction will be financed with debt underwritten by BNP Paribas SA and JPMorgan Chase & Co. Atos plans to hold a conference call on July 23 at 8 a.m. Paris time to discuss the transaction.