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Finland's Tieto in US$1.5b deal to buy Nordic peer Evry
[OSLO] Finnish technology firm Tieto has agreed to pay US$1.51 billion in cash and shares for Norwegian competitor Evry , the two companies announced on Tuesday.
The proposed combination will create a digital consultancy with 24,000 employees and annual revenues of nearly 3 billion euros, offering software, cloud solutions, robotics and other services.
"The foundation of the merger is based on highly complementary businesses in Norway, Finland and Sweden," the companies said in a joint statement.
The agreed offer, representing a 15.4 per cent premium over Evry's last traded share price, will give the Norwegian firm's owners a 37.5 per cent stake in the new company and a total cash consideration of approximately 200 million euros.
Tieto and Evry aim to reduce costs by some 75 million euros annually via layoffs and other cuts, most of which will be achieved by the end of 2022.
"The companies estimate that non-recurring implementation costs, anticipated to materialize by 2022 will amount to 120-140 million euros," they added.
Tieto has for years been seen as a potential buyer of Evry as it seeks to boost its size, and sources told Reuters in 2014 that the Finnish firm was considering a bid for the company at that time.
"We believe Tieto's ability to achieve earnings growth was getting scarce as rationalisation had reached its limits and there were no longer sufficient drivers to achieve significant growth in the IT market for a company of Tieto's size," industry analyst Mikael Rautanen at Indeeres wrote in a research note.
"If the merger is successful, it offers a clear new phase and a driver for value creation for Tieto's strategy for the next five years," he added.
Tuesday's deal, which requires support from two thirds of shareholders in each firm, has the support of Tieto's two largest owners, activist fund Cevian Capital and Finnish state investment arm Solidium, as well as Evry's top owner, private equity firm Apax Partners.
The largest owners of the merged firm will be Apax Partners with 20.4per cent and Cevian with 9.4per cent.
Completion of the transaction, which is also subject to regulatory approvals, is expected to take place in the fourth quarter of 2019 or during the first quarter of 2020 at the latest, Every and Tieto said.
"We expect consolidation of the IT services market to continue also in the future," Indeeres analyst Rautanen said.