CGE&Y has been in talks with Boulogne-based Transiciel for the past eight months regarding a potential takeover, the report said.

The news follows CGE&Y’s decision in July, to raise 460m euros ($529m) in funds through issuing new debt. Transiciel’s share price rose to a peak of 10.2 euros on the Paris Bourse, which values the company at about 190m euros ($216m).

Transiciel, with revenue of 565m euros ($644m) in full-year 2002, ranks behind CGE&Y, Atos Origin, Steria and Unilog, and a potential takeover would boost CGE&Y’s revenue run rate to $7.64bn based on full-year 2002 figures.

The company employs 7,400 staff across France, Belgium, Spain and the Netherlands, and specializes in providing IT consulting, systems engineering, network management, application management and systems integration for firms such as Dassault Aviation, Tenneco Automotive, JCDecaux, Gemplus, Agence France-Presse, Unedic, Initiative Media, Rieter, EDF, and Panzani.

The French IT services market has been in desperate need of consolidation for some time now. As ComputerWire mentioned in its Global Computing Services publication on July 25, there are a number of mid-tier players in France such as Transiciel, GFI Informatique, and Thales Information Systems, that are being squeezed out of the market by competition and pricing pressure from their larger rivals.

French services group SchlumbergerSema said in its most recent quarter that it was suffering as a result of low demand and pricing pressure in France. Lackluster activity in France, mostly due to the decline in the French IT services industry leading to an overcapacity of consulting and systems integration specialists, the company said.

These factors have also affected struggling CGE&Y, which has been among the worst affected players in France, with revenue here declining 8% to $1.26bn in full year 2002, while Transiciel, which makes 73% of its sales in France, remained more or less flat at $472m. In July, Cap responded cutting some 185 senior executive positions within its consulting division out of a total of 287 lay-offs to be made in France, which will equate to a 3% reduction in headcount.

Transiciel, though, has struggles have been far worse. Revenue fell 13.6% to 254m euros ($286.6m) during the first half of 2003. Revenue from systems integration fell 21% to 117m euros ($132m) and sales from consulting services decreased 10% to 64m euros ($72.2m).

The company said market conditions had been more difficult than anticipated during the first half, and partly blamed strikes by workers’ unions and the reduction of the working week for the performance of its French operation.

Transiciel had been looking to merge with a similar sized firm. Last year the company bid against rival GFI Informatique to acquire Thales Information Systems in a deal that would have effectively doubled the size of the business to about $1bn in revenue.

However, Transiciel pulled out of the running, and GFI failed to complete the deal, with GFI’s plans scuppered however by its inability to raise the required funds for the deal. Jean-Paul LePeytre, the CEO of Thales IS, told ComputerWire in July that a sale of the business is no longer a strategic priority.

Our strong relationship with Thales Group can be utilized to grow our profile over the next couple of years. Perhaps we will find another alliance in two or three year’s time, but we have a lot of synergies [with Thales Group] in business and solutions, LePeytre said.

Source: Computerwire