French IT services company Capgemini will buy IGATE Corp — a US-based company with a large presence in India — for $4 billion (Rs 25,392 crore). The combined entity, with a revenue of $14 billion, will take on rivals such as IBM, and will help the French firm gain a further foothold in India and expand its base in the country.
The acquisition will give Capgemini access to IGATE’s customers including 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. It will also help Capgemini save $45-65 million annually in India.
“This (acquisition of IGATE) will give to the group’s Indian operations a new scale, allowing us to compete on par with the best US-based and Indian-based companies,” Capgemini chairman and CEO Paul Hermelin said.
Capgemini already employs over 50,000 people in India, making the country among its largest offshore centres.
Co-founded by Ashok Trivedi and Sunil Wadhwani, Nasdaq-listed IGATE acquired Patni Computer Systems in 2011 for Rs 5,500 crore. It is now headed by former Infosys executive Ashok Vemuri.
A majority of the company’s 33,000 employees are based out of India.
“In Capgemini, we have found a partner that will advance our ability to innovate and build industry solutions to enhance the value proposition we bring to our clients,” Vemuri said.
The combined group would have around 1,90,000 employees and an operating margin of 10%. Following the merger, Capgemini’s total employee strength in India will jump to around 80,000 by 2015-end. This will allow the company increase outsourcing from India and reduce project delivery costs.
The French company 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 Nasdaq.
The board of both firms and a majority of IGATE shareholders have approved the merger.
(With inputs from agencies)