French IT company Atos (ETA: ATO) announced on Monday that it agreed to acquire Michigan-based IT company Syntel (NASDAQ: SYNT) for USD 3.4 Billion cash.
Atos, a provider for IT services in multiple sectors, said the deal to acquire Syntel will strengthen its capabilities to provide complete services for U.S. customers and boost its business, finance and insurance sections. Chief Executive Officer of Atos, Thierry Breton, described the acquisition to be “a transformational step for our Business & Platform Solutions Division as it will significantly enhance its growth and profitability profile through an extended digital services offering, cutting-edge India-based delivery platforms, as well as revenue and cost synergies.”
Syntel, a 38-year-old company with 23,000 engineers, provides IT services and technology with the use of software development centers in India. The purchase of Syntel occurred after Atos’ failed attempt to purchase Gemalto last year.
The USD 3.4 Billion purchase, valued at USD 3.57 Billion including net debt, will come out to USD 41 per share, a 4.78% premium to Syntel’s closing price at USD 39.13 on Friday. Atos said Syntel will bring in around USD 1 Billion in revenue and an operating margin of 24%, and the Company expects digit earnings per share (EPS) growth in 2019.
Some analysts and traders looked at Ato’s first half results to be a cause for concern reporting a half-yearly organic revenue growth of 5.8%. Senior Analyst for Northern Trust Capital Markets, Ameet Patel, stated “Atos H1 release suggests to us a deteriorating underlying picture, particularly in North America, against hopes that by this time its organic growth trajectory should have been improving.”