Steria offers $956m for Xansa
Published:31-July-2007
By BR staff writer
French IT services vendor Groupe Steria has tabled a bid for outsourcing firm Xansa, which values the UK-based company at approximately 472m pounds ($956m).
Under the offer, which has been recommended by Xansa's board, Steria will pay 130 pence in cash for each Xansa share. This represents a 61.3% premium on Xansa's average closing price over the month ended July 26. Shares in Xansa soared over 30% in trading on Friday after the company revealed it was in advanced takeover talks.
According to Steria, the merger will create an enlarged company with annual revenue of approximately 1.8bn euros ($2.5bn), putting it "among the top 10 IT services providers in the European and UK markets". Steria also expects the deal to produce pre-tax cost savings of 24m euros ($32.8m) in 2008, rising to 49m euros ($67m) the following year and 53m euros ($72.5m) from 2010 onwards.
Headquartered in Paris, Steria has approximately 10,700 employees operating in 15 countries. In 2006, the company reported total sales of 1.3bn euros ($1.7bn), of which 42% was derived from its domestic market, with 23% coming from the UK, 16% from Germany, and 19% from the rest of Europe, including the Nordics, Spain, Switzerland, and the Benelux region.
One of the main reasons for acquiring Xansa is to gain access to its offshore delivery centers. The company has over 5,000 staff working out of centers in Noida, Chennai, and Pune, while Steria has yet to establish a significant presence in the region. The French company has tended to enter into partnerships with Indian companies, such as application development company PSI Data Systems.
Steria has preferred to take the partnership route due to its traditional focus on consulting, systems integration and infrastructure management projects, which lend themselves less easily to offshore delivery models. However, according to John Torrie, Steria's CEO for Northern Europe, the company is being increasingly drawn into the application management and development space and therefore needs an increased offshore capability.
Steria, which derives approximately 38% of its revenue from the public sector, will also be looking to take advantage of Xansa's growing presence in this space. Xansa's public-sector sales increased by 56% in the 12 months to the end of April 2007 and the company has significant deals with the UK National Health Service, the Home Office, and the Cabinet Office.
Steria has a number of clients in the UK local government space and has recently announced contract wins with Havant and Eastbourne borough councils. In central government, the company provides services to the Belgian finance ministry, the French ministry of economy, finance and industry, and the UK national probation service.
