Capgemini plans in buying its smaller rival Altran technologies for 3.6 billion euros - H Y R Tutorials

Capgemini plans in buying its smaller rival Altran technologies for 3.6 billion euros

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French consulting and IT services provider Capgemini has agreed to buy smaller rival Altran Technologies for €3.6bn in cash, the two companies said on Monday.

The deal — announced after the markets closed — will create a group with revenues of €17bn and more than 250,000 employees. It will also allow Capgemini to expand beyond consulting, IT services and digital transformation into Altran’s business of engineering and R&D services.

The friendly takeover values Altran at €14 per share. The total cash consideration will amount to €3.6bn, excluding net financial debt of €1.4bn.

The deal is subject to regulatory approval but has been recommended and approved by the boards of both companies. Capgemini has also agreed to acquire an 11 per cent stake in Altran from a group of investors led by private equity firm Apax Partners.

Consultants are seeking to boost their firepower in the fast-growing business of digital transformation as the so-called fourth industrial revolution continues to overturn the business models of traditional industries.

Capgemini said that the deal would give it critical mass in software engineering through a presence in India and eastern Europe, where it is seeking to grow. Over the medium term the market for engineering and R&D services were expected to grow by 9 per cent a year, the two groups said.

Paul Hermelin, chairman and chief executive officer of Capgemini, said in a statement that the deal would allow Capgemini to expand its presence in “the digital transformation of industrial and tech companies”.

He added: “By joining forces, we are positioning ourselves as a clear strategic partner to assist our clients in taking full advantage of the revolution created by the developments of the cloud, edge computing, internet of things, artificial intelligence and 5G.”

Dominique Cerutti, chairman and chief executive officer of Altran, said that “in an industry that is consolidating rapidly there is no doubt that Capgemini is the ideal partner to build together a world leader in digital transformation”.

Capgemini said it had secured a bridge financing of €5.4bn. It expected the deal to boost earnings per share by 15 per cent before synergies in the first year, and more than 25 per cent by 2023.

Capgemini recorded turnover of €13.2bn in 2018 and Altran revenues of €2.9bn.