Capgemini taps into Brazil IT market

Capgemini has placed a bet on Latin America, announcing on Thursday a deal to buy a majority stake in CPM Braxis, Brazil’s largest information technology services group.

Europe’s largest IT services company is paying €233m ($298m) for a 55 per cent stake in Brazil’s CPM Braxis, a regional market leader. CPM Braxis has an enterprise value of about €437m.

The deal will give Capgemini a platform to grow further in Brazil, where it will be looking to compete with rivals in the region such as Accenture, Hewlett-Packard, IBM and Unisys.

According to figures from Gartner, Latin America’s IT services market is worth about $23bn, with Brazil accounting for just under half of the total market. Brazil’s IT services market, which has seen the fastest rate of growth in the region, is projected to exceed 10 per cent a year in 2014.

Capgemini joins a growing list of companies that have made acquisitions in Brazil this year as multinationals bet on the Brazilian economy, which is forecast to grow 7 per cent this year on the back of a huge boom in domestic consumption.

The French group said that as part of the deal with CPM Braxis it has an option to buy the remaining 45 per cent of the company from the existing shareholders between three to five years after the deal is signed.

CPM Braxis employs more than 5,500 people and is forecasting revenues for 2010 of €450m. The group is particularly strong in the financial sector, where the Brazilian lender Bradesco was its biggest client as well as being its largest shareholder before the Capgemini deal. The Brazilian group also has clients in telecoms, utilities and manufacturing.

Paul Hermelin, chief executive, said the CPM Braxis deal was part of a wider growth strategy for Capgemini that would help the French group extend its presence in Brazil as well as supporting its existing global clients in the region.

Capgemini already employs a few hundred people in Brazil and has businesses in Mexico, Guatemala, Chile and Argentina.

Capgemini, which like others in the IT services sector, was hit hard by the global financial crisis is benefiting from a recovery in corporate investment.

The group started hiring again at the end last year and increased its global headcount by 6 per cent during the first half of this year – mainly in emerging markets in Asia, eastern Europe, North Africa and Latin America.

The French group said at its half-year results in July that it expects revenue growth of 3 to 5 per cent in the second of 2010 compared with the same period last year.

Capgemini shares, which have risen about 4 per cent since the beginning of the year, were trading at €35.19 in early afternoon trading on Thursday.

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