Sema's shares plunged on the London and Paris exchanges yesterday over concerns that the services company had paid too much for mobile telephony software supplier, LHS Group.
Sema agreed to pay $4.7bn in stock for LHS with the aim of becoming one of the largest suppliers of billing software to wireless phone companies. It will issue 2.6 ordinary shares for each LHS share, valuing the Atlanta based vendor at $69.70 per share - a 76 per cent premium over its closing price on Nasdaq yesterday.
Pierre Bonelli, Sema's chief executive, said that "the ultimate prize for a technology company is market share", and that the merger would help it achieve its stated aim of leading in the telecoms market for customer care and billing, prepaid, messaging, and mobile commerce software and services.
Bonelli claimed that the transaction would combine LHS' 25 per cent share of the customer care and billing applications market with Sema's 17 per cent, resulting in it owning between 37 and 40 per cent of the sector and becoming the largest such provider.
It will also boost Sema's software licence sales to 21 per cent from 11 per cent of the total last year, and increase revenues coming from the telecoms sector to 25 per cent of total turnover from about 16 per cent last year, Bonelli added. Two thirds of the latter are likely to come from mobile phone operators.
On completion of the deal, Sema's shareholders will own about 73 per cent of the combined company and LHS stockholders will own the rest. Bonelli also claimed the acquisition would add to earnings from day one, and said he expected earnings per share to increase by up to 10 per cent, excluding goodwill amortisation, for the fiscal year ending September 2001.
He forecast that job losses would be "relatively minimal" because both companies had kept costs down.
Sema has been looking for a US acquisition for some time to boost its revenues in the region, and the move will provide it with a US customer base and resultant cross selling opportunities.
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