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Capgemini to acquire Kanbay for $1.25 billion, boost Indian operations news
Our Corporate Bureau
26 October 2006

Mumbai: Paris-based Capgemini SA, the biggest computer-services company in Europe, proposes to acquire Kanbay International Inc. for $1.25 billion and double its staff in India to win more business from financial companies in the US. The Rosemont, Illinois-based Kanbay has most of its 6,500 employees in India.

Following the acquisition, Capgemini will have more employees in India than anywhere else except France.

Capgemini is offering $29 a share in cash for Kanbay, 16 per cent more than the company's October 25 closing stock price. The Kanbay board has recommended that shareholders approve the transaction.

The purchase will boost Capgemini's Indian operations by 89 per cent and US consulting sales by 45 per cent. The deal will also give the French company clients, including HSBC and Morgan Stanley. Capgemini chief executive Paul Hermelin hopes to capitalise on a trend of financial industry outsourcing services to low-cost India.

The purchase will enhance earnings-per-share by five per cent next year and 10 per cent in 2008, Capgemini said. It also raised projections of operating margin to over 10 per cent from the earlier eight per cent target it set for 2008.

Capgemini provides consulting, technology, and outsourcing services to more than 700 financial companies worldwide in retail banking, payments and insurance systems. Globally, the company has 5,000 people focused on financial companies. The purchase of Kanbay, with 5000 people at three sites in India, doubles Capgemini's staff for that industry. Capgemini returned to profit last year after cutting around 14,000 jobs, ending three annual losses.

Kanbay's net income in the third quarter rose 11.5 per cent to $9.7 million from $8.7 million in the corresponding period the previous year, the company said on its Web site. Kanbay said sales rose 33 per cent to $114.1 million, excluding acquisitions. The company sees full-year revenue of at least $413 million, up from a previous target of $402 million.

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Capgemini to acquire Kanbay for $1.25 billion, boost Indian operations