Capgemini close to buying iGate: report
23 Apr 2015
Capgemini, one of the world's largest consulting, technology and outsourcing services companies, is close to buying Nasdaq-listed iGate, in a deal which, if successful, would be one of the biggest M&As in the IT services sector, The Times of India today reported, citing multiple sources.
French IT company Atos and BPO major Genpact have also held talks over a potential deal, but Capgemini is said to have nearly sealed the transaction, the report said.
Capgemini is seeking to buy the 54-per cent stake held by the promoters and private equity firm Apax Partners initially and may later take iGate private by buying out the shares of other shareholders, the report added.
iGate founders Sunil Wadhwani and Ashok Trivedi hold a combined 25-per cent stake in the company, with Apax holding 29 per cent, and the remaining is free float.
With revenues over $ 1.2 billion, and a global employee pool of over 33,484, Igate is a mid-size IT and BPO services provider.
The three-decades-old company provides consulting, technology and business process outsourcing (BPO) services in addition to product and engineering solutions on a business outcomes-based model.
The company has multi-location operations, which include the largest offshore software development centre in Bangalore, and with 300 clients it caters to several verticals including banking and financial services, insurance, healthcare, life sciences, manufacturing, retail, energy and utilities.
iGate and other smaller IT outsourcing services providers compete with Indian heavyweights such as Tata Consultancy Services, Wipro and Infosys on price to win market share.
Two years after former Infosys senior executive Ashok Vemuri was hired to run iGate after the controversial exit of Phaneesh Murthy, growth at the New Jersey-based company continues to lag.
Gross margins over the last 12 months have dropped to 36 per cent in 2014 from 39.3 per cent in 2013, and net income declined to $110 million from $129.8 million.
This has come at a time when several IT services companies are posting utilisation rates above 80 per cent, while iGate's utilisation dropped to 75.9 per cent in 2014 from 80.6 per cent in 2013.
It has a market cap of $3.6 billion and its stock yesterday closed at $44.46.
Capgemini, which had 2014 revenues of €8.4 billion, operates in more than 30 countries, employing over 1.4 lakh people in North America, Europe, and the Asia Pacific region.
In India, the company has over 60,000 people working across seven locations at Mumbai, Bangalore, Kolkata, Pune, Hyderabad, Chennai, Salem and Gurgaon.
The Paris-based company has a market cap of €12.8 billion and posted net profit of $623 million on revenues of $11.4 billion.
