Capgemini shares rose on Monday after a newspaper said Wipro, India's third-biggest software exporter, was expected to bid for the French computer consultancy firm.
The Hindustan Times said Wipro was expected to bid for Capgemini by the end of January, citing unnamed sources.
Capgemini shares were the top gainers on France's benchmark CAC-40 index, rising as much as 7.3 percent to an intraday high of 43.70 euros -- its highest since early November. The stock later pared those earlier gains and was up 4.8 percent at 42.65 euros.
Wipro's bid for Europe's largest computer consultancy could be close to 48 euros per share, the paper said. The stock closed at 40.71 euros in Paris on Friday, valuing the company at 5.9 billion euros ($8.5 billion).
Citigroup and HSBC have been in discussions to finalize a plan before the year-end holidays, the paper said, citing investment banking sources.
"Details about leveraged buyout financing and other options were discussed," it quoted a banker close to the deal as saying.
"We would not want to comment on market speculation. Of course, we are interested in larger deals and aggressively looking for inorganic growth options," Sudip Nandy, chief strategic officer of Wipro, told the paper.
Asked to comment on the report, a Capgemini spokeswoman in Paris said, "We do not comment on market rumor."
The Right Price?
One Paris-based trader said hedge funds were using the newspaper report to drive up Capgemini's share price, while another analyst said the idea of a Wipro bid was realistic.
"It's clear that the Indian firms have a lot of capital to invest in Europe. A Wipro/Capgemini deal could take place," said Arnaud Scarpaci, fund manager at Agilis Gestion in Paris.
Scarpaci's portfolio does not include Capgemini shares.
However, Ofi Patrimoine fund manager Anthony Penel said the reported Wipro price offer of 48 euros was not high enough for him, given the fact that Capgemini shares were trading at around 60 euros during the first quarter of 2007.
"I hope it doesn't happen because even with this premium of 20 percent, we're still a long way off the company's valuation a few months ago," he said.
Speculation has persisted for several months about a possible bid by Wipro, as well by larger rival Infosys Technologies.
Capgemini said in July it was not planning to sell its IT consulting arm and that it had not been in contact with Infosys.
The French group itself bought an Indian software firm, Kanbay, in 2006.
Indian software companies are looking for overseas acquisitions, especially in Europe, to help offset a stronger rupee and a skills shortage at home, and to service clients outside their English-speaking core market.
Based on latest prices, Capgemini shares have fallen by around 10 percent since the start of 2007 -- underperforming a flat performance in the DJ Stoxx European technology sector.