French technology consulting firm Altran has agreed to acquire engineering services firm Aricent Inc. from a group of investors led by private equity giant KKR & Co. LP for a total enterprise value of €1.7 billion ($2 billion) in cash.
The acquisition of California, US-based Aricent will enhance Altran’s financial profile, improve profitability and cash generation, the Paris-headquartered company said in a statement on Thursday.
The transaction marks another high-profile divestment by KKR, which has sealed full or partial exits in a half-dozen Indian companies over the past two years. These include selling Alliance Tire Group to Japan’s Yokohama Rubber, divesting its stake in Gland Pharma to China’s Shanghai Fosun Pharmaceuticals and offloading its stake in TVS Logistics to Canadian pension fund CDPQ.
Aricent was KKR’s maiden India bet. The PE firm had first acquired a majority stake in Aricent, previously known as Flextronics Software Systems Ltd, in 2006 in a leveraged buyout deal worth $900 million. The amount included $300 million as an equity infusion and the remaining as debt.
KKR had increased its stake to 79% in Aricent in 2009. At the time, Canada Pension Plan Investment Board (CPPIB) had also invested in Aricent. The other investors in Aricent, who acquired stakes in 2008 and 2009, include venture capital firm Sequoia Capital and the Bahrain-based The Family Office.
Altran, meanwhile, has sealed its second deal in India within three months and the fourth in two years. It had agreed to acquire Bangalore-based Internet of Things startup GlobalEdge Software Ltd for an estimated Rs 310-410 crore ($48.3-64 million) in cash in September.
In December last year, Altran had acquired to acquire engineering services provider Pricol Technologies Ltd. And in 2015, the French firm had bought Bangalore-based startup SiCon Design Technologies Pvt. Ltd.
Altran said it expects the Aricent deal to generate €150 million of additional revenue, translating into €25 million EBITDA run-rate synergies and €25 million of delivery and cost synergies within three years. EBITDA is short for earnings before interest, tax, depreciation and amortization.
This acquisition will allow Altran to realise its 2020 financial goals ahead of time, the firm said.
Aricent provides integrated design and engineering services, primarily to companies in the communications and technology, semiconductor and software industries, it said. The company generated revenue of $687 million in the 12 months through June 2017. It has about 10,500 employees and operates through 24 engineering centers and design studios, serving close to 360 clients globally.
Altran, in which PE firm Apax Partners holds an 8.4% stake, also said that the combined entity had revenue of about €2.9 billion in the 12 months through June and an EBITDA margin of 14.9%.
“Altran will now have superior scale and scope, and now masters all four critical criteria necessary to lead the industry: a global presence and reach, leadership across most industries, strong expertise in key technology domains and a superior global delivery supply chain,” said Dominique Cerutti, chairman and CEO of Altran Group.
The transaction is likely to close in the first quarter of 2018, subject to receipt of antitrust approvals and customary closing conditions, Altran said in a statement.
The French company has obtained a financing package for the transaction, which is intended to be refinanced in part through a €750 million rights issue, subject to shareholders' approval and market conditions, it said.