IT firm Atos has confirmed buying out Syntel Inc. for $3.4 billion cash to enhance its footprints in North America and have an access to financial customers such as State Street Corp and American Express Co.
Elie Girad, the finance chief of Atos said that this step will provide a massive boost to their digital and U.S. business. The French company will be reinforcing its existence in the U.S. market.
The operating profitability and revenue fell in North America according to Atos earnings. The total share grew 1.7% to 6 billion euros thus improving the overall margin. The company also confirmed its yearly target.
Atos is expecting the deal to close by the year end and immediately adding to the earnings. It will provide the double digit accretion by 2019. Both the companies have approved the transaction on July 20.
Gerald is expecting great potentials for synergies on margins and sales. He also further added that the acquisition price is 14.7 times Syntel’s earnings. The American company’s shares are growing since Atos’s market capitalization is of 13.2 billion, euros which is almost five times of Syntel.
Syntel’s top three customers FedEx Corp., State Street Bank, and American Express accounted for 45% of revenue in the last year from which only 11 % shares were from outside North America. Syntel has faced a drop in revenue by 4.4% in the last two years to $923.8 million during 2017.
Even though the company receives majority of revenue from the U.S., the amount of 23,000 workforce is from India. The company has also development centers globally in Scotland, Poland, Philippines and India with 76% of billable workforce situated in India. The transaction will be funded with debt and underwritten by JPMorgan Chase & Co. and BNP Paribas SA.