Capgemini Service SAS of Paris, seeking to expand in the financial services market as well as in India, has agreed to buy the outsourcing provider Kanbay International Inc.
The technology and consulting company announced the deal Thursday and said it would buy all outstanding shares of Kanbay for $1.25 billion, or $29 per share. That is a 15.9% premium over the seller’s closing price Wednesday and a 28.3% premium on its average price for the past month.
The companies expect to close the deal next quarter. Kanbay is based in Rosemont, Ill., but most of its operations are in India.
Salil Parekh, Capgemini’s North American chief executive, said in an interview that the move “deepens our financial services expertise by providing some very point solutions in the card space, in the processing space, that we did not have.”
It also “expands our scale drastically offshore.” The acquisition would nearly double Capgemini’s head count in India, to 12,000.
Capgemini provides consulting and outsourcing services to the insurance, retail banking, and capital markets industries. Mr. Parekh said that Kanbay’s processing platform could “be expanded across our base.”
The French company said that it expects the acquisition to boost its earnings per share by 5% in 2007 and by 10% in 2008. Kanbay’s chairman and CEO, Raymond Spencer, is to join Capgemini’s top management.
Madhavi Mantha, a senior analyst at Celent LLC in Boston, said Kanbay was “a prime acquisition target for a Western-based firm that’s looking to extend its offshore capabilities.”
Capgemini “is looking to build up its strength on the global front,” and adding more employees in India would be a big step forward, Ms. Mantha said.
Capgemini has been looking to narrow its focus lately and has already shed businesses in life sciences and health care, she said. “They’re trying to focus on financial services. A pretty significant chunk of Kanbay’s business is financial services.”
Making the acquisition a success would take some work, but there is long-term potential for gains, Ms. Mantha said. “There’s opportunity in being more prominent in these markets.”
