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Corporate Communications - February 29, 2000.
Cap Gemini and Ernst & Young have agreed terms for the acquisition of Ernst & Young Consulting
Cap Gemini and Ernst & Young have reached an agreement on the terms and conditions for combining their consulting and IT services which would give birth to a leading player in the sector. Pursuant to the agreement:
- Cap Gemini will acquire almost all of the Ernst & Young Consulting business, with headcount of approximately 18,000 and 1999 revenues of around Euro 3.5 billion;
- Cap Gemini will issue new shares in exchange for the Ernst & Young Consulting businesses in the respective countries contributed to the transaction.
The completion of the transaction is now subject to the vote of Ernst & Young partners (qualified majority of all Ernst & Young partners and specific majority of 75% of the Consulting partners). These votes will take place in the next few weeks on a country by country basis. The results of these votes should be communicated in April.
Cap Gemini shareholders will then discuss and approve the terms and conditions of the transaction at an Extraordinary Meeting to take place by the end of June 2000. The terms and conditions of the transaction are as follows:
- the initial agreement covers Ernst & Young Consulting businesses in the following major countries: USA, Canada, United Kingdom, Germany, France, Spain and Italy;
- over the next few weeks, other countries are expected to join this agreement, including in particular Sweden, Norway, Finland, Denmark, The Netherlands, Belgium, Australia, New Zealand;
- if all Ernst & Young Consulting entities participate in the transaction, Cap Gemini will issue a maximum of 43.5 million new shares and pay Euro 375 million. Subject to market conditions, up to a maximum of 50% of the Cap Gemini newly issued shares will be sold by 1st April 2001, of which a minimum of 25% upon closing, to cover certain tax, pension and other liabilities of the Ernst & Young partners. The remaining shares will be subject to retention and forfeiture agreements over 5 years and any disposals based on an orderly marketing agreement.
The transaction should be accretive to Cap Gemini earnings per share from 2000 onwards, and shall be accounted for under the French GAAP “pooling of interest” method. The transaction will in particular enable the combined Group to:
- become a major player in the US (the US should represent over one third of its revenues) and strengthen its position in Germany;
- enjoy an extensive industry coverage and thus be the firm of choice for major worldwide organizations;
- expand considerably in consulting, a high added value segment of critical importance which provides clients with the complete range of services they need for their strategic moves;
- implement on a larger scale all skills required today to help its clients facing the challenges of the “connected economy”: strategy consulting, innovation, deployment of “state of the art” technologies, knowledge management, human resources and marketing.
For further information:
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