In a move to expand its operations in North America, French internet technology services company Atos SE (XPAR:ATO, Financial) announced on Sunday it is acquiring Syntel Inc. (SYNT, Financial) for approximately $3.4 billion.
According to the terms of the all-cash agreement, Atos will pay $41 per share, a 4.78% premium to the Michigan-based IT company’s closing price on Friday. Including debt, the deal is valued at $3.57 billion.
The deal follows Atos’ failed attempt to buy software company Gemalto NV (XAMS:GTO, Financial) last year.
The union with Syntel, according to Atos, will strengthen its banking, finance and insurance activities as well as allow it to provide complete IT solutions to U.S. customers. In a statement, Thierry Breton, Atos’ chairman and CEO, said the deal also aligns with the company’s “strategic priorities.”
“It represents 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,” he said.
In addition, Atos is expecting the deal to generate double-digit earnings per share growth as early as 2019 and approximately $120 million in cost synergies by 2021. Revenue synergies are projected to reach $250 million over that same period.
Bharat Desai, co-chairman and co-founder of Syntel, also commented on the deal, calling it a “win-win proposition” for customers and employees.
“Our focus at Syntel is to help customers transform and succeed in the digital economy. Since its founding, our ‘Customer for Life’ ethos has guided our investments in high-impact, domain-led services and intellectual property,” he said. “I am grateful for the trust and confidence of our customers and the passion, commitment and innovative spirit of our employees. Together they have enabled Syntel to achieve great heights. I am confident that this combination will deliver significant value to all stakeholders.”
The deal is expected to close by the end of the year.
Shares of Atos fell nearly 7% on Monday to close at 114.85 euros ($134.30) on the French exchange, though the negative reaction was mainly due to the company posting disappointing financial results for the first half of 2018. GuruFocus data shows the stock has gained approximately 1% year to data.
Syntel shares were trading around $40.62 on Monday, up 3.8%. GuruFocus estimates the stock has climbed 74% year to date.
Disclosure: No positions.
