Under the terms of the merger agreement, Capgemini will acquire all of the outstanding common shares of Kanbay for $29 per share in cash.
This represents a premium of 15.9% to Kanbay's closing share price on Wednesday October 25 and 28.3% to the average price during the month prior to announcement. The transaction values Kanbay's share capital including vested stock options, warrants and restricted shares at $1.25 billion. The Boards of Directors of Capgemini and Kanbay have approved the transaction.
The transaction is subject to customary closing conditions, including Kanbay's shareholders approval and anti-trust clearance. It is expected that the transaction will close by early 2007.
In addition, Capgemini has entered into share purchase agreements to acquire 14.9% of Kanbay's outstanding shares from certain core shareholders.
This acquisition is fully in line with Capgemini's expansion strategy of significantly increasing Capgemini's presence in India (+89% based on Q3 figures). The combined company would have headcount reaching 12,000 employees by the end of 2006 in India which would therefore become the second largest country (with 16% of total headcount).
Raymond J. Spencer, Chairman and Chief Executive Officer of Kanbay, will join the top management of Capgemini.
Spencer said "The combination of Kanbay with Capgemini is very exciting news for our shareholders, customers and employees. While this transaction creates excellent value for shareholders, Capgemini also shares our existing vision and stated strategy. Thus, this deal represents a continuation of our existing approach. In addition, the two organizations will benefit from complementary business philosophies and cultures."
Capgemini Chief Executive Officer, Paul Hermelin noted: "The acquisition of Kanbay, a world-class IT services provider, supports our growth strategy and significantly enhances our global Banking, Financial Services and Insurance (BFSI) practice, particularly in North America and India, where Kanbay has over 5,000 associates. The acquisition also gives us valuable capabilities in Consumer and Industrial Products, Telecommunications, Media, Life Sciences and the Travel & Leisure verticals."
"The acquisition of Kanbay is excellent news for our shareholders, our clients and our people. It fits in perfectly with the Group's expansion program called I cubed which focuses on three levers: industrialization, intimacy with our clients and innovation" underlines Hermelin. "This acquisition occurs in a context of strong momentum for Capgemini: after releasing good H1 results, the Group posts a 13.5% revenue growth at constant rates and perimeter in the 2006 third quarter," he added.
"We believe this is a landmark transaction in the global IT services industry. This event can fundamentally transform the professional services industry by enabling efficient global services delivery via an integrated single point solution delivered in a seamless fashion resulting in a lower total cost of ownership for the client," both Paul Hermelin and Raymond Spencer concluded.
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