Top Stories
Top Stories
Wires

UPDATE 2-Capgemini shares surge on Altran combination

Inti Landauro and Matthieu Protard

* Capgemini boosted by deal to buy Altran

* Altran shares leap to close to offer price Aim to tap growing demand for industrial software (Adds comments from CEO and analysts)

PARIS, June 25 (Reuters) - Capgemini's shares surged on Tuesday on the back of the software and consultancy company's 3.6 billion euro ($4.1 billion) takeover of smaller rival Altran to create a company with more than 250,000 staff.

With the acquisition, Capgemini said it hoped to tap into demand from its customers for software services in industries ranging from telecom to aerospace. The combined company would have annual revenues of 17 billion euros ($19.4 billion).

By comparison, Accenture's website says the company has 477,000 staff and revenues last year of $41 billion, while IBM says it has around 350,600 staff and had 2018 revenues of $79.6 billion.

Capgemini Chief Executive Paul Hermelin said the deal would put the company at the forefront of the digital transformation of industrial and tech companies.

"We are positioning ourselves as a clear strategic partner to assist our clients in taking full advantage of the revolution created by the developments of the cloud, Edge computing, IoT, artificial intelligence and 5G," he added.

Capgemini shares were up 7.2% by 0920 GMT, having touched their highest level since late April, while Altran climbed 21% to 13.92 euros, just shy of the offer price.

"We think the deal makes strategic sense, helping Capgemini to capitalise on the digital transformation of industrial companies," wrote analysts at Credit Suisse.

Late on Monday, Capgemini said it would offer 14 euros per Altran share in cash, representing a 22% premium over Altran's Monday closing price of 11.47 euros.

Capgemini said it would pay 3.6 billion euros in cash and would assume Altran's net debt of 1.4 billion euros.

Capgemini expects the deal will result in large cost savings and will add more than 25% to its earnings per share by 2023.

Hermelin said Capgemini hoped to maintain its dividend payout policy after the Altran acquisition, although the company would not carry out share buybacks over the next two-to-three years.

"We view the deal positively as it should enhance Capgemini's medium-term market positioning and margin prospects," wrote analysts at SocGen, which kept a "buy" rating on Capgemini shares.

BREAKINGVIEWS-Capgemini will toil to turn buzzwords into gold ($1 = 0.8783 euros)

(Reporting by Sudip Kar-Gupta, Josephine Mason, Pawel Goraj and Danilo Masoni; Editing by Louise Heavens and Keith Weir)