UPDATED 14:55 EDT / JULY 23 2018

INFRA

IT services giant Atos inks $3.4B deal to acquire Syntel

Atos SE, a major player in the global information technology services market that closed 2017 with revenue of nearly $15 billion, is growing its reach.

The French company on late Sunday announced that it has inked a deal to acquire industry peer Syntel Inc. for $3.4 billion. The sum breaks down to $41 per share, a 4.8 percent premium to the Friday closing price of Syntel’s stock. Atos expects the transaction to close later this year, at which point Syntel’s 23,000-plus employees will join its ranks.

Syntel brings a lot to the table besides its sizable talent pool. The Troy, Michigan-based company has been active in the IT services market for 38 years and operates across a variety of segments, from software development to outsourced technical support. Syntel generated $923 million in revenue in 2017.

The acquisition will significantly expand Atos’ presence in the United States. The company has been steadily growing its North American footprint over recent years, previously acquiring the IT services business of Xerox Corp. in 2015 for $966 million. More recently, Atos mounted an unsuccessful attempt to buy another industry player called Gemalto NV.

Besides establishing a bigger U.S footprint, Atos said the purchase of Syntel will strengthen its position in the banking, finance and insurance markets. The company projects that the deal will facilitate annual cost savings of $120 million and open $250 million in new revenue opportunities by 2021.

All that is expected to come on top of the nearly $1 billion in annual sales that Syntel currently generates. Overall, Atos sees the transaction resulting in an operating margin gain of 24 percent.

The deal will open a new source of revenue for the French company in a time when it’s facing investor pressure to drive more growth. Atos’ stock dropped as much as 7 percent early this morning following the release of its second-quarter earnings report, which revealed that the firm increased sales by only 1.5 percent during the period.

Image: Atos

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