Capgemini buys IGATE for $4 bn

New York, April 27

French IT services company Capgemini will buy IGATE Corp — a US-based company with a large presence in India — for $4 billion in cash to create an entity with combined revenue of $14 billion to take on rivals like IBM.

The acquisition will give Capgemini access to IGATE’s customers like General Electric and Royal Bank of Canada and boost its US-generated business to 30% of its total revenue and make North America its largest market.

Capgemini will offer $48 for every IGATE share as part of the definitive merger agreement, 4.7% more than the IGATE stock’s Friday closing price of $45.85 on the Nasdaq stock exchange, the companies said in a joint statement.

New Jersey-based IGATE — an applications, network and BPO specialist — will also help Capgemini expand in infrastructure services, healthcare, retail and manufacturing markets.

Capgemini and IGATE would together have combined annual revenue of 12.5 billion euros ($14 billion) this year. The merged group would have around 1,90,000 employees and an operating margin of 10%, Capgemini said.

About 27,000 of the workforce will be based in India and another 50,000 in the US.

North America will represent 30% of the estimated combined revenue.

The merger has been agreed by the Boards of both companies and a majority of IGATE shareholders. “It will give us a new status on the American market,” Capgemini chief executive Paul Hermelin said.

Capgemini has for some time been targeting expansion in North America, which it says is the most innovative technology and services market in the world. The acquisition will be part funded by Capgemini’s own cash as well as an increase in its capital, it said. — PTI