Technology

Capgemini Spends $4B to Acquire IGATE

Deal will strengthen the French company's footholds in the Americas and India.
Katie Kuehner-HebertApril 27, 2015

Paris-based Capgemini said Monday that it would pay roughly $4 billion to buy IGATE, a technology and services company in Bridgewater, N.J. The deal could strengthen Capgemini’s application and infrastructure services as well as business process outsourcing and engineering services — and add “flagship clients,” including General Electric and Royal Bank of Canada.

IGATE shareholders would receive $48 in cash per share, or 4.7% more than the stock’s April 24 close in New York. Capgemini is financing the deal with a mixture of cash, debt, and new stock, and expects the acquisition of notable contracts to boost its annual revenue to 12.5 billion euros ($13.5 billion), and 2016 earnings per share by at least 12%. The company expects a 2017 EPS boost of 16%.

“IGATE is a leading company that perfectly fits our strategic ambition,” Capgemini chairman and chief executive Paul Hermelin said in a press release. “It will give us a new status on the American market, and take further our industrialization journey to offer ever more competitive services to our clients. This will also give to the group’s Indian operations a new scale, allowing us to compete on par with the best U.S.-based and India-based companies.”

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“The deal marks a new chapter in the history of Capgemini, a competitor to Accenture Plc and International Business Machines, and one of the five biggest computer-services providers in the late 1980s,” Bloomberg wrote. “It is the largest acquisition for the French firm since it bought Ernst & Young’s consulting business 15 years ago for about $10.5 billion.”

Ambit Capital analyst Sagar Rastogi told Reuters the deal would add roughly 33,000 staff to Capgemini’s 145,000 and boost the share of employees located in low-cost countries such as India.

This would enable the company to better challenge low-cost Indian service providers like Tata Consultancy Services and Infosys said Anurag Rana, an analyst at Bloomberg Intelligence.

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