Friday, September 03, 2010

Capgemini acquires 55% stake in Brazilian IT services company for 233 million euros

Capgemini, a provider of consulting, technology and outsourcing services, has just reached an agreement with the shareholders of CPM Braxis which will see Capgemini acquire a 55% interest in the leading Brazilian IT services company.

Going forward corporate growth will relentlesslycome from the BRICs and the CIVATS. If you still dont know what these acronyms stand for, you might as well take a logn vacation around the world and read the book The World is Flat. In the developping economis, it will be about efficiency and consolidation including in consulting but for growth all progressive firms would have to move overseas. This is precisely what the second-tier consulting and IT services firms in the US are doing now.

With a client base of major Brazilian and international companies, particularly in the financial sector, CPM Braxis expects to record 2010 revenues of around BRL 1 billion (EUR 450 million). The deal will enable Capgemini to considerably boost its presence in Brazil an IT services market amongst those with the highest potential. The agreement will see the Group widen its client base and contributes to Capgemini’s ability to better support its international clients in their developments in Brazil. CPM Braxis will benefit from Capgemini’s assets – notably its global reach, methodologies and network of alliances - to serve its own clients, both in Brazil and around the world.

Brazil represents 47% of the Latin American IT services market, valued at USD 23 billion. Driven by a booming economy, the Brazilian IT services market has enjoyed the highest growth rate in the region for the past five years, and yearly growth should exceed 10% until 2014.

With over 5,500 employees, CPM Braxis boasts a diversified business portfolio focused on Application Outsourcing and Enterprise Application Services, and Infrastructure Integration and Infrastructure Services, the majority of which is delivered through multi-year contracts. CPM Braxis serves over 200 clients, and is especially strong in the financial sector. Its biggest client, major Brazilian bank Bradesco, was also its biggest shareholder prior to the transaction. Capgemini will be able to draw on its expertise and knowledge of the local market. CPM Braxis is also present in the telecoms sector, as well as in manufacturing and utilities.

The company saw growth of 12% in 2009 and should grow by nearly 20% in 2010. CPM Braxis should post above-market growth over the coming years, and is also currently expected to register an Ebit margin of around 6% in 2010, which looks set to rise over the years to come.
Under the terms of the transaction, Capgemini will acquire 55% of the share of CPM Braxis, representing a total amount of BRL 517million (EUR 233 million). The enterprise value of CPM Braxis is estimated at BRL 970 million (EUR 437 million). The operation will be funded using the Group’s net cash position. It will comprise of a CPM Braxis share capital increase of BRL 287 million (EUR 129 million), and a share buy-back from CPM Braxis’ existing shareholders for BRL 230 million (EUR 104 million), all of which have decided to remain in CPM Braxis and to proportionally reduce their stake in the company.

Capgemini has an option to buy the remainder of CPM Braxis’ capital (45%), and the existing shareholders have an option to sell their remaining shares. These options can only be exercised between the 3rd and the 5th anniversary of the closing date (on the basis of an estimated price based on fair market value at the time of the exercise of these options). Capgemini will consolidate CPM Braxis in its accounts as of the transaction’s expected closing in early October 2010 and will recognize a balance sheet liability, representing the estimated value of the 45% stake in the company at the time of the exercise of the options.
For Paul Hermelin, Chief Executive Officer of Capgemini: “The acquisition of CPM Braxis – a step in line with the Group’s growth strategy - allows us to fulfill three objectives: to extend our presence in a fast-growing country; to support our global clients in the regions where they focus their investment, and to strengthen our Group with the addition of a experienced management team, and more than 5,500 dynamic employees”.

Luiz Carlos Trabuco, Chief Executive Officer of Bradesco, states: “Bradesco congratulates CPM Braxis on becoming part of one of the ten largest worldwide groups in the segment; and also Capgemini, for expanding its global activities in Brazil. We believe that this union will further broaden the competitiveness of CPM Braxis, as well as the company’s growth capacity in the vigorous Brazilian market and strengthen its capability in assisting global clients.”

José Luiz Rossi, Chief Executive Officer of CPM Braxis,explains that “Joining a group with the worldwide reach of Capgemini is a great opportunity, in the high-growth IT services market in Brazil. We will expand our client base by making our services available to Capgemini’s international clients present in Brazil, and will also be able to offer Capgemini’s global expertise to support our major Brazilian clients in their international development projects. Finally, joining Capgemini is a chance to give our employees more attractive career opportunities.”

With this deal, Capgemini reinforces its global dimension and resolutely multicultural nature. Brazil will become the Group’s sixth largest country in terms of headcount, with more than 6,200 employees.


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