Le Figaro cited unnamed sources in the investment community and services sector claiming that Capgemini might be interested in acquiring all or part of Atos Origin. A Capgmini spokesman declined to comment when contacted by Computer Business Review.
Atos Origin revealed last month that it had received expressions of interests, widely reported to have come from buyout specialist Permira and hedge fund Centaurus Capital. Atos Origin has since recruited Rothschild and Goldman Sachs to weigh up the benefits of a sale.
Our View
We shouldn’t get too excited about the prospect of a marriage between France’s two largest indigenous IT services players going ahead.
Atos Origin has said in the past that it would block any takeover approach from its larger peer, and Capgemini has only just got its profitability back on track after completing the sort of restructuring program on which Atos has just embarked.
Problems at Atos Origin’s UK business last year led to it recording organic sales growth of just 1.5% in 2006 with its operating profit margin falling to 4.6% from 7.3%. In contrast, successful overhauls of its US business and global sourcing strategy helped Capgemini double its net profit last year, and drive its operating profit margin up to 5.8% from 3.2% in 2005.
One possibility is that Rothschild and Goldmans may recommend that Atos Origin’s best bet for maximizing its shareholder value is to break it up and sell or spin out divisions such as its Worldline transaction processing unit.
If that is the case, then Capgemini may be interested in snapping up some Atos assets, but an outright takeover bid looks unlikely. Atos Origin’s market capitalization currently stands at around 3.8bn euros ($5.1bn), while there have been suggestions that Permira and Centaurus could offer as much as 58 euros per share, or 4bn euros ($5.4bn).
Capgemini is in the process of digesting two medium-sized US acquisitions (Kanbay and Software Architects), and investment analysts have suggested that Cap would over-stretch itself if it attempted to finance a deal of the magnitude of Atos. Meanwhile, investors’ memories will sound warning bells if they venture back to the last time that Capgemini made a major takeover – its messy $11bn takeover of Ernst & Young Consulting in 2001.
