Capgemini acquires Kanbay for $1.25 bn
The merged entity has major plans for India.
France-based infotech consultancy company Capgemini today acquired US-based Kanbay International for $1.25 billion to accelerate its growth in India and better its position in finance consulting in North America.
The merged entity has major plans for India, according to Capgemini (India) CEO Baru S Rao. “We are targeting 35,000 Indian employees by 2010, recording growth of 32 per cent per annum,” he said. Capgemini has 67,000 employees across the globe.
Capgemini would continue using Kanbay’s name for “some more time” till a final name for the merged company was decided, added Rao.
“With this deal, we will accelerate our long-term (margin recovery) plan. We want to lift our margin above 10 per cent while limiting the group’s cyclical exposure,” Capgemini global CEO Paul Hermelin said earlier in the day, over a conference call.
The company recently bought a 51 per cent stake in the business process outsourcing unit Unilever India Shares Services Ltd.
Capgemini is to pay $29 per share in cash, representing a premium of 15.9 per cent to Kanbay’s closing share price on October 25 and roughly three times Kanbay’s 2006 revenue.
“It is an expensive company but it is a company that is doing well,” Hermelin said, adding that the over-$400 million Euro Kanbay’s revenue was growing by around 30 per cent a year.
The company said it could fully finance the Kanbay deal with its cash resources but added it would not rule out raising up to Euro 500 million in equity to fund further possible acquisitions.
The acquisition would boost its earnings per share by more than 5 per cent in 2007 and 10 per cent in 2008 and triple Capgemini’s workforce in India to around 12,000 people.
The transaction was expected to close by early 2007, the companies added in a joint statement. “The acquisition of Kanbay, a world-class infotech services provider, supports our growth strategy and significantly enhances our global banking, financial services and insurance practice, particularly in North America and India, where Kanbay has over 5,000 associates,” Hermelin said in a statement.
Incidentally, the acquisition will make it the largest non-Indian infotech employer (excluding BPO employees) in India, ahead of IBM and Accenture (which otherwise have over 45,000 employees overall) in percentage terms.
The combined entity, Capgemini and Kanbay, with a full-time employee count of 12,000 in infotech is the largest at 16 per cent, followed by IBM at 11 per cent (20,000) and Accenture at 11 per cent (12,500).
At present, Capgemini’s employee count stands at 6,000 in infotech and 600 in BPO. After the merger, this will increase to 12,000 in infotech by the end of the year. However, the BPO headcount would continue to be 600 till the end of this year, Rao said.
EDS will follow Accenture in terms of percentage of full-time employees, with 8 per cent or 9,000 full-time employees.
The percentage is based on the total number of global employees. By the end of 2007, Capgemini expects to add 4,000 more full-time employees in India.
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