Capgemini To Buy KPN IT Services Unit For EUR255 Million
SOURCE: EasyBourse.com
DATE: July 25th, 2008
ARTICLE
French information-technology services company Capgemini (CAP.FR) Friday said it will pay EUR255 million for a unit of Royal KPN NV’s (KKPNY) Getronics subsidiary, bolstering its position in the Dutch public sector.
The acquisition of the business application unit, which generated revenue of EUR297 million and earnings before interest and tax of EUR29 million in 2007, will be 5% accretive to Capgemini’s earnings in 2009, Chief Financial Officer Nicolas Dufourcq told a conference call.
Capgemini has already identified “conservative” cost synergies of EUR10 million a year, Dufourcq said.
“At first sight it looks expensive, but with the synergies it’s actually quite attractive,” said Exane BNP Paribas analyst Adam Wood, who has an outperform rating on Capgemini stock.
By acquiring Getronics PinkRoccade Business Application Services BV, or BAS BV, Capgemini will tap into the business’s strong footing in the Dutch public sector.
BAS BV generates 40% of its revenue from the public sector, which offers stable revenue streams at a time of increasing concern about companies’ future discretionary IT spending.
The deal will “increase significantly the resilience in the Dutch market,” Capgemini Chief Executive Paul Hermelin told the conference call.
“To buy into a more recurring business at this stage of the cycle is sensible,” said Exane’s Wood.
Capgemini will also be able to leverage its strong offshoring capacity, which was boosted in early 2007 by the $1.25 billion acquisition of U.S. company Kanbay International, the majority of whose employees are based in India.
The company plans to replace progressively the offshoring services BAS BV currently gets from Indian firm Mindtree Ltd. (532819.BY) with Capgemini’s own operations, Hermelin said.
Capgemini said it expects to close the deal, which will be paid in cash, by the end of 2008, subject to works council and antitrust authority approval.
Petercam analyst Eric de Graaf said considering current market circumstances the deal also gives a good price to KPN, which has been steadily shedding non-core operations from Getronics after acquiring the company last year. Petercam has a buy rating on KPN.
At 1215 GMT, Capgemini shares were up 0.7%, or EUR0.26, to EUR38.75, outperforming an overall lower market. KPN shares were up 1.5% to EUR10.88, in a broadly lower AEX market.
Capgemini is being advised by Lazard and Rabo Securities on the deal, with Clifford Chance and Latham as legal advisors.
Company Web site: www.capgemini.com
By Jethro Mullen, Dow Jones Newswires; 33 1 4017 1738; jethro.mullen@dowjones.com
(Roberta Cowan in Amsterdam contributed to this report.)
Click here to go to Dow Jones NewsPlus, a web front page of today’s most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=momliFUbkLkO9OuIQJjF%2Bw%3D%3D. You can use this link on the day this article is published and the following day.
Related Posts
You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Leave a Reply