CGEMY Capgemini SE (PK)

French IT services company Capgemini (CAP.FR) said Thursday it will buy a majority stake in Brazilian IT services company CPM Braxis for EUR233 million in cash, as it looks to boost its presence in emerging markets.

Capgemini has repeatedly said in the past months that it is seeking acquisitions, including larger buys, chiefly to expand its footprint in high-growth emerging markets.

Europe's largest computer services company said the Brazilian IT services market has had the highest growth rate in Latin America for the past five years, and is set to grow more than 10% annually.

"The acquisition of CPM Braxis is a step in line with the group's growth strategy," Chief Executive Paul Hermelin said in a statement.

At 0910 GMT, Capgemini shares were trading up 1.7% to EUR35.16, outperforming a slightly lower CAC-40 index.

Cheuvreux in a research note said the deal is a good move as it allows the company to expand in emerging countries to serve local businesses. The bank has a selected list rating on the stock.

CM-CIC also said the price paid for the stake is "reasonable" given the expected growth rate for the group and the market and the potential to improve margins. CM-CIC rates Capgemini buy.

CPM Brazil's operating margin is expected to be around 6% in 2010, slightly lower than at Capgemini, which targets a margin of 6.5% this year.

Capgemini said CPM Braxis's enterprise value is estimated at EUR437 million and that the company should post revenue of around EUR450 million in 2010.

Capgemini plans to grow CPM Braxis, whose clients are mainly in the finance sector but also in telecoms and utilities, mostly organically, Hermelin said on a conference call. There are no plans to make another acquisition in the Brazilian market, he added.

"The company saw growth of 12% in 2009 and should grow by nearly 20% in 2010," the group said.

After the completion of the Brazilian deal, expected in early October, Capgemini might do a few more smaller acquisitions in other markets but another larger deal is unlikely before the end of the year at least, Hermelin also said.

"Once we have bought 100% of CPM Braxis, this will have cost us roughly EUR500 million so that will eat a large chunk of our funds," the CEO said.

The Paris-based company said it reached an agreement with CPM Braxis's shareholders to acquire 55% of the group for EUR233 million in cash. It said the transaction will be funded using its net debt position and will comprise a CPM Braxis share capital increase of BRL287 million, or EUR129 million, and a share buy-back from CPM Braxis' existing shareholders for BRL230 million, or EUR104 million.

Brazilian bank Bradesco will be CPM Braxis's second-largest shareholder after the deal with about 20% of the capital, Capgemini said.

Capgemini also has an option to buy the remaining 45% of CPM Braxis' capital and the existing shareholders have an option to sell their remaining shares.

It will consolidate CPM Braxis in its accounts as of the transaction's expected closing in early October.

-By Ruth Bender, Dow Jones Newswires; +33 1 4017 1740; ruth.bender@dowjones.com

(Angeline Benoit in Paris contributed to this report)

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