According to Italian daily Milano Finanza, IBM Corp and Italian automaker Fiat SpA are considering a joint bid for Genoa-based Elsag, which employs 2,600 people and provides IT consulting, system integration and outsourcing services to clients in the Italian and eastern European markets. However, opposition to the sale from the Italian unions has led Finmeccanica to assure them that it does not plan to sell off its entire shareholding in the firm.

Last week, US-based systems integrator Ciber Inc completed its takeover of UK-based software and services provider ECSoft Group Plc, which gives the company further presence in the UK, Germany, the Netherlands, and Hungary, and additional annual sales of between $50m and $54m.

Potential interest from IBM and Fiat follows the major $6bn 10-year outsourcing contract IBM signed in June 2001 with Fiat, as part of an alliance set up by IBM and two of its Italian subsidiaries, and Fiat’s internal IT services operations ITS and GSA. The companies will develop e-business software, which they will market to other companies, primarily in the automotive industry. The alliance pools together 2,600 staff and is expected to have initial revenue of 700m euros ($756m) annually.

Elsag itself is an attractive acquisition target in its native Italy. The company ranks as the second largest indigenous IT services provider behind Telecom Italia’s Finsiel division, and counts many blue-chip and public sector firms such as Royal Sun Alliance, Gewiss, Genoa Chamber of Commerce, Cassa Forense, Sol, Aerporta di Roma, Ansaldo, La Poste, Sogei and ENEL among its customers. During full-year 2001, the company generated revenue of 412.9m euros ($445.9m), up 11% on the previous year. This compares to Finsiel, which has 6,300 employees, and made an operating loss of $19.4m on sales of $1.3bn in 2001.

Elsag continues to show healthy revenue growth, and during the six months ended June 30 2002, grew its operating profit 11% to 10m euros ($10.8m), on revenue that increased 14% to 199m euros ($214.9m).

Other potential suitors for Elsag could include Siemens Business Services, and private equity firms, although the most likely to table an offer would be Engineering Ingegneria Informatica SpA, which ranks as Italy’s third largest IT services firm. The company employs 2,500 people and made revenue of 211m euros ($227.9m) in 2001, and an acquisition of its closest local rival would create a combined operation with annual revenue of 623.9m euros ($673.8m) based on 2001 revenue, enabling it to compete on a more level playing field to the likes of Finsiel, and IBM Global Services, EDS, Siemens Business Services, Compaq GS, SclumbergerSema, HP Services, and CSC, which rank as the largest players in the market.

Source: Computerwire