HP rumours persist as CGEY bids for Transiciel
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European services company CGEY is planning to buy French rival Transiciel - and HP is rumoured to be sizing up CGEY.
20October 2003 Cap Gemini Ernst &Young (CGEY), Europe's largest IT services company, is to buy Transiciel, the French services company, for €244million in shares.
The deal means that all three of Europe's largest indigenous services companies have been involved in major acquisitions in the past year.
The takeover of Transiciel comes just months after one of CGEY's biggest European rivals, Atos Origin, bought another, SchlumbergerSema, for €1.3 billion ($1.5 billion), and a year after Logica bought CMG for €796 million.
CGEY's move, which had been widely expected, comes against a backdrop of continuing rumours that Hewlett-Packard (HP) is planning a bid for CGEY. Critics say that HP is struggling to reinvent itself as an intergrated services and systems giant, along the IBM model.
HP's efforts to buy a major services company have so far been thwarted. In October 2002, IBM completed the acquisition of the IT consultancy division of accountants PricewaterhouseCoopers (PwC) for $3.5 billion, after a proposed acquisition by HP a year earlier had failed.
But CGEY chief executive Paul Hermelin played down the rumours, saying he would be "very surprised" if HP were to make a bid. "I spoke to Carly Fiorina [HP's chief executive] on 20 August and she told me she had ruled out a bid for Cap Gemini because we were too strong in consulting," he said. "She could always change her mind, but it would seem a bit inconsistent."
The planned acquisition of Transiciel is subject to shareholder approval. Analysts say it is likely to go ahead because it has the backing of Georges Cohen, who owns 37.4% of Transiciel.
Both companies are strong in France, where they compete head on, but are weaker internationally. And both need to strengthen their position in outsourcing.
However, similar reservations were expressed about the Logica and CMG merger, which has been considered a success so far.
Separately, Atos Origin executives have indicated that they plan to drop the SchlumbergerSema name altogether and trade internationally as Atos Origin.
