French IT firm Sopra to buy Steria in $1 billion deal

PARIS Tue Apr 8, 2014 9:37am EDT

Pierre Pasquier, chairman and chief executive of French IT services company Sopra, speaks during a Reuters forum on IT services in Paris September 15, 2009. REUTERS/Charles Platiau

Pierre Pasquier, chairman and chief executive of French IT services company Sopra, speaks during a Reuters forum on IT services in Paris September 15, 2009.

Credit: Reuters/Charles Platiau

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PARIS (Reuters) - French IT services group Sopra (SOPR.PA) plans to take over rival Steria (TERI.PA), in an agreed all-stock deal that would create the third-biggest French player in its home market with revenue of more than 3.1 billion euros ($4.3 billion).

Plans for the tie-up come in a week of multi-billion-euro merger activity in France, involving companies from telecoms groups SFR and Numericable (NUME.PA) to top cement maker Lafarge (LAFP.PA).

The Sopra offer values Steria at around 730 million euros and would create a combined group with some 35,000 employees in 24 countries.

Based on 2013 French sales figures, it would rank as the third-largest French IT player behind Capgemini (CAPP.PA) and Atos (ATOS.PA) and would figure among the biggest 10 in Europe as a whole alongside IBM (IBM.N) and Accenture (ACN.N).

"Such a deal will highlight the pressing need for consolidation in the IT services market and could encourage other mid-sized European players to team up or lean against international players," analysts at brokerage Aurel BGC wrote in a note.

Analysts said the companies complement each other well, as Sopra is strong in France, where Steria is seeing its margins under pressure. Steria, meanwhile, has a greater exposure to foreign markets such as Britain and Scandinavia.

Steria is also more indebted than Sopra and would benefit from lower financing costs for the merged entity, they said.

Steria shareholders will receive one Sopra share for four Steria shares held, the companies said in a statement, adding that the deal had been approved by the companies' boards.

With an exchange value of 22 euros per Steria share, the offer represents a 40 percent premium to Steria's closing price on April 4, since when both shares had been suspended.

Shares in both Steria and Sopra will resume trading on Wednesday at the market opening, a spokeswoman for the companies said.

Steria had a stock market value of 520 million euros at the time of the suspension, while Sopra was worth 1.02 billion.

The resulting group will be presided over by Sopra's founder and president Pierre Pasquier, while Steria boss Francois Enaud will become chief executive.

The tie-up should generate operational savings of 62 million euros a year starting in 2017, the companies said. It would have a neutral effect on basic earnings per share in 2015 and strongly boost earnings from 2016.

The combined group aims for revenue above 4 billion euros and an operating margin gradually improving towards 10 percent, the companies added.

($1 = 0.7277 Euros)

(Writing by Natalie Huet; Editing by James Regan and David Holmes)

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