RealTime IT News

Capgemini Spends $1.25B For U.S. Presence

IT consulting firm Capgemini said it will acquire Kanbay for approximately $1.25 billion.

The deal represents a generous premium to Kanbay  shareholders, valuing the stock at almost 29 percent over its average price over the past thirty days.

But the company said the acquisition is a good strategic fit that strengthens its position both in the U.S. market and in India.

It also boosts Capgemini's reach in key vertical markets, most notably financial services.

Capgemini CEO Paul Hermelin said the buy "supports our growth strategy and significantly enhances our global banking, financial services and insurance practice."

Kanbay, based in Rosemont, Ill., will also provide an immediate lift to Capgemini's bottom line.

The Paris-based consultancy said it expects the acquisition to add 5 percent to earnings in 2007 and ten percent in 2008.

But Capgemini said the deal was made principally for strategic rather than financial considerations.

Kanbay currently has over 5,000 employees in India, raising total head count for the combined companies to 12,000 associates in that country by the end of the year.

Capgemini said the purchase positions it as a leader in the financial services sector, which it said represents 22 percent of the global IT market.

A Forrester report published earlier this month notes that Kanbay has "deep vertical expertise in the banking and financial services industry."

Stephanie Moore, who authored the report, said Kanbay's expertise in business intelligence is widely acknowledged, and credited the company with strong capabilities in testing, compliance and application development and maintenance.

The deal also confirms Capgemini's U.S. ambitions.

In recent years, it has acquired Ernst & Young's consulting business, created a joint venture with Cisco  and formed a global alliance with Microsoft .

But growth in the U.S. has grown sluggishly for Capgemini.

In a financial update published today, it reported third quarter revenue growth of 5.4 percent in the U.S. market compared to last year's third quarter.

That compares poorly with growth in other regions.

For instance, revenues grew by 15.4 percent in Europe and Asia Pacific regions.