Capgemini to buy IGATE in USD 4 billion deal

Capgemini plans to buy United States-based IGATE Corp for $4 billion cash to make North America its biggest market and is raising its sales outlook for 2015 after a solid first-quarter, the French IT services company said on Monday.

IGATE, a technology and services company with strength in the financial services sector but also active in retail, manufacturing and healthcare, had 2014 revenue of $1.3 billion, with double-digit growth and a 19 per cent operating margin.

Capgemini, the market capitalisation of which was about 13 billion euros ($14 billion) at the close of business on Friday, said it would pay $48 a share for IGATE. The US company's shares on NASDAQ stood at $45.85 at Friday's close.

The deal will be financed through a combination of Capgemini's own cash, debt and an equity portion that will not exceed a 6 per cent dilution of the French company's share capital.

Capgemini said it had the backing of shareholders representing 54 per cent of IGATE's share capital and that the deal would enhance earnings by 12 per cent in 2016 and 16 per cent in 2017.

After completion, North America will represent 30 per cent of estimated combined 2015 revenue of 12.5 billion euros ($13.58 billion), raising Capgemini's revenue in the region by about a third. The combined group's operating margin will be above 10 per cent, it said.

IGATE has about 80 per cent of its operations in North America, which Capgemini said is "by far the largest and most innovative technology and services market in the world".

The acquisition will strengthen its businesses in application and infrastructure services as well as business process outsourcing and engineering services, also adding new flagship clients such as General Electric and Royal Bank of Canada.

In a separate statement bringing forward its first-quarter revenue anouncement, Capgemini said that sales grew by 10.5 per cent in the quarter and reset its revenue growth target to "at least 5 per cent" from its previous forecast of between 3 per cent and 5 per cent.

($1 = 0.9195 euros)

(Reuters)