Cap Gemini SA share price up, to acquire IGATE in a $4-billion deal

French computer services and technology company Capgemini announced on Monday it has reached an agreement to buy US-based peer IGATE Corp for $4.04 billion, making North America its biggest market.

The French company, which for some time has been aiming to expand its presence in the region, will pay $48 per IGATE share, compared to Fridays close on the NASDAQ at $45.85. It will finance the transaction with cash, debt and an equity portion that will not exceed a 6% dilution of its share capital. The deal has received the support of 54% of the US firms shareholders.

IGATE, with main focus on the financial services sector, but also active in retail, healthcare and manufacturing, had revenue of $1.3 billion in 2014, with double-digit growth and an operating margin of 19%. Capgemini, which generated sales of €2.76 billion ($3 billion) in the first quarter of 2015, said the purchase of its US peer will bring total group revenue to €12.5 billion this year. The combined group will have an operating margin of 10% and 190 000 employees worldwide.

“IGATE is a leading company that perfectly fits our strategic ambition,” said Paul Hermelin, Chairman and CEO of Capgemini. “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.”

North America, where 80% of IGATEs operations are based, was Capgeminis strongest region in the first quarter, with revenue growth of 34%. It is the largest and most innovative market for IT services, Capgemini said, and will account for 30% of the combined groups 2015 revenue.

“In Capgemini, we have found a partner that will advance our ability to innovate and build industry solutions that will enhance the value proposition we bring to our clients,” said Ashok Vemuri, CEO of IGATE. “In addition, this powerful combination will provide exciting opportunities for our employees to expand their capabilities.”

The new company will offer more platform-based and intellectual property-based solutions, bolstering Capgeminis businesses in application and infrastructure services as well as business process outsourcing and engineering services. IGATEs North American customers include General Electric and Royal Bank of Canada, Mr. Hermelin said.

Cap Gemini SA rose 0.82% to €79.01 per share by 09:20 GMT in Paris, marking a one-year increase of 49.78%. The company is valued at €12.82 billion based on Fridays close. According to the Financial Times, the 19 analysts offering 12-month price targets for Cap Gemini SA have a median target of €76.00, with a high estimate of €95.00 and a low estimate of €59.00. The median estimate represents a 3.02% decrease from the previous close of €78.37.