Paris-based Capgemini said it offered $29 a share in cash for Kanbay, 16% more than the company’s closing stock price on Tuesday.
MUMBAI: Capgemini SA, Europe’s biggest computer-services company, agreed to buy Kanbay International Inc for $1.25 billion, doubling its staff in India to win more contracts helping banks run their global networks.
Paris-based Capgemini said it offered $29 a share in cash for Kanbay, 16% more than the company’s closing stock price on Tuesday.
The board of Rosemont, Illinois-based Kanbay, most of whose more than 6,500 employees are in India, recommended that shareholders approve the transaction.
The purchase will help Capgemini chief executive officer Paul Hermelin capitalise on a trend of financial industry jobs from accounting and insurance claims processing to analysis shifting from the West to low-cost India. It will also give Capgemini new clients including HSBC Holdings Plc and Morgan Stanley.
The company said the deal will boost Indian operations by 89% and US consulting sales by 45%.
For Cap Gemini, “this operation answers two basic needs, namely to deliver services to big banks and financial customers and to have a platform to expand in Asia,” Emmanuel Soupre, a fund manager with Neuflize Gestion in Paris, which manages about $15 billion in assets.
With the purchase, Cap Gemini will have more people in India than anywhere else except France.
Computer services salaries in India are about a fifth of those in the US or Europe, Aurel-Leven SA analyst Brice Thebaud told Bloomberg.
Capgemini India chief executive Baru Rao said the earlier target of having a headcount of 12,000 in the next three years has been just scaled up three times with the acquisition.
Rao would head the combined entity in India which would account for 16% of the collective global workforce. The comparative figures for Capgemini’s peers like IBM is 20,000 employees (11% of global workforce), Accenture: 12,500 (11%), and EDS: 9,000 (8%).
The combined entity would have six centres spread across Mumbai, Pune, Kolkata, Hyderabad, Bangalore, and Chennai. By 2010, India is expected to account for over a third of Capgemini’s global headcount.
Kanbay’s high offshore skew is more profitable and the purchase will increase Capgemini’s operating margin to more than 10%, more than the 8% target set for 2008.
Rao said while both the companies have been mostly IT focused, business process outsourcing business would also grow.
While Kanbay has till now steered clear of the BPO, Capgemini re-entered the space recently as a majority partner in Unilever India Shared Services, also known as Indigo, which has 600 employees. Unilever is its only client and Rao said efforts are on to expand the business globally.
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