Atos is buying US-based IT company Syntel in an all-cash deal valued at about $3.57bn including net debt. Atos' CEO Thierry Breton says an incentive for the deal was SYNT’s strong know-how in digital fields, including cloud services, social media, mobile, analytics and automation. It is paying $41/share, a 4.8% premium to the $39.13 closing price on Friday.
The acquisition would also boost Atos’s presence in North America, where the company’s revenue fell unexpectedly in the first three months of the year. In particular, Syntel has strong relationships with financial-services firms, as well as companies in the health-care and retail sectors.
The match between the two companies offers multiple opportunities for revenue synergies, expected to reach c. $250 million by the end of 2021 with c. $50 million operating margin, through cross-selling opportunities on both European and US customer base, it says. Annual cost synergies are expected by the end of 2021 at c. $ 120 million from G&A optimization taking advantage of the combined scale as well as the alignment of KPIs in Business & Platform Solutions.
This acquisition is expected to be double digit accretive to Group EPS as early as 2019 as well as with a strong double digit EPS accretion with full run rate synergies after 3 years. This is a major step for Atos, fully supported by Syntel management. Khanna Rakesh CEO of Syntel will become Atos Executive Committee member. Both companies’ Boards of Directors have unanimously approved the transaction.
