Merger to enhance delivery in India, aid business in North America

Our Bureau

Services cost

The acquisition

will increase Capgemini's India headcount by 89 per cent

Capgemini hopes

to take advantage of India's low services cost compared to Europe and the US

Mumbai, Oct. 26

Europe's largest IT services and consultancy company Capgemini agreed to acquire US-based Kanbay International on Thursday, saying the merger would enhance its delivery platform in India and strengthen its business in North America.

Kanbay has 6,900 employees of whom over 5,000 are in India. As much as 85 per cent of Kanbay's business comes from North America.

The acquisition will at once increase Capgemini's India headcount by 89 per cent so that by the end of the calendar year it will have 12,000 employees in the country, constituting 16 per cent of its total headcount as well as its largest employee base outside of France.

In manpower terms, the acquisition propels Capgemini to third place in India among the non-Indian IT services companies, after IBM and Accenture, said Mr Baru S. Rao, CEO, Capgemini India at a news conference here. This is after excluding BPO activities, he added.

As a percentage of total employee base, Capgemini's India headcount in IT services (16 per cent) will be higher than that of IBM (11 per cent), Accenture (11 per cent) and EDS (8 per cent), he said.

By 2010, Capgemini will have 35,000 employees in India, constituting about 30 per cent of its workforce of over 90,000 worldwide, said Mr Christophe du Vignaux, Rightshore Delivery Financial Controller with Capgemini.

A large India delivery presence where services still cost lower than in Europe and the US, is crucial to any IT services company, said a Capgemini official.

Kanbay shares which are listed on NASDAQ are being acquired for $29 per share in the all-cash buyout, at a premium of 15.9 per cent to Kanbay's closing price on October 25 and 28.3 per cent to average price during month prior to announcement, said a statement from Capgemini. In addition there are share purchase agreements to acquire 14.9 per cent of Kanbay shares.

Related Stories:
Kanbay Q2 revenues up at $105.8 m
Kanbay to invest $50 m more in Hyderabad

(This article was published in the Business Line print edition dated October 27, 2006)
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