)
This article has been modified. Please see the clarification at the end.
French information technology majors Capgemini and Atos are in talks to acquire the Nasdaq-listed IGATE.
Although in early stages, the companies were negotiating with Apax Partners, the largest shareholder in IGATE that was looking for an exit, sources told Business Standard.
"Atos is looking more aggressive because it has a smaller offshore delivery presence in India," an industry source said.
In 2011, IGATE, then led by Phaneesh Murthy, had roped in Apax Partners to part-fund the $1.2 billion buyout of Mumbai-based Patni Computer System. Apax Partners had lent IGATE $480 million to fund the acquisition.
Sources said the private equity player was looking for an exit because it had converted the debt into equity ahead of an option in 2016. Apax Partners now holds 29 per cent in IGATE, higher than the company's founders Sunil Wadhwani and Ashok Trivedi, who jointly hold around 25 per cent.
"After the elevation of Salil Parekh as the deputy CEO of the company, Capgemini wants to make a stronger play in the US, banking on its offshore delivery strength in India. It has identified BFSI (banking, financial services and insurance) as a key area, where IGATE has a strong presence," said another industry source. "For Atos, focused on Europe, the acquisition could provide a footprint in North America and expand its delivery presence in India," he added.
Asked for their responses, IGATE and Capgemini said they do not comment on speculation. An email to Atos went unanswered and Apax Partners could not be reached.
In a filing with the US Securities and Exchange Commission last December IGATE said Apax Partners wanted to have the option to liquidate its stake. "They are waiting for a good valuation, which could be at least eight or nine time of IGATE's Ebitda (earnings before interest, taxes, depreciation and amortisation)," sources added.
In its accounting year ended December 31, 2014, IGATE reported revenues of $1.26 billion, an increase of 10.2 per cent over the previous year, while the net profit declined by over 15 per cent to $110.0 million on a debt refinancing charge the company incurred in the third quarter.
Ebitda stood at $276.4 million as compared to $284.8 million in 2013. IGATE is seeing fewer client additions while a couple of large client engagements have gone awry.
Atos earlier this year acquired Xerox's ITO Business for $1.05 billion, which increased up its presence in India and almost tripled its revenue from the US. In August last year, Atos acquired the Europe-based Bull for Euros 620 million.
Capgemini increased its global presence with the acquisition of Kanbay in 2006. The acquisition allowed it strong offshore delivery from India and enhanced its presence in the US financial services segment.
CLARIFICATION:
In the report, “Capgemini, Atos vie for IGATE” published on April 17, it was incorrectly mentioned that IGATE and Capgemini did comment on speculation. What both the companies had said was that “they don’t comment on rumours and speculation”. Also, Salil Parekh is the Deputy CEO of Capgemini and not as mentioned in the report. The errors are regretted.
