SLB fans my response to this piece is why do the deal then?
Schlumberger says Sema not ideal takeover
By Lucas van Grinsven, European technology correspondent
LONDON, Feb 13 (Reuters) - Schlumberger chief executive Euan Baird on Tuesday dismissed doubts over the takeover of Anglo-French information technology company Sema (quote from Yahoo! UK & Ireland: SEM.L), but acknowledged it may not be an ideal acquistion.
``This may not be the best takeover that Schlumberger ever did, but it is certainly the friendliest,'' he told a small group of journalists here.
New York-based Schlumberger said on Monday it had agreed to buy troubled Sema for $5.2 billion in cash.
Baird said that oil industry analysts who cover his company had always opposed the firm's venturing into other areas such as smart cards and semiconductor testing, but Baird justified this acquisition by saying that ...``the information technology is just beginning and we want to be part of it''.
Baird, who is in London with Sema chief executive Pierre Bonelli to rally investors behind the proposed takeover, said it would be successful if integration was achieved of three vertical units: telecoms, utilities and networking activities.
``That's the low hanging fruit,'' Baird said.
It would still take two years to pick that fruit, because Baird said on Monday that the takeover would dilute earnings before amortisation of intangible assets in 2001 and 2002, and would become neutral in 2003.
``It takes time to find baskets and get that fruit,'' he remarked.
He described the takeover as ``fast and friendly'', aimed at retaining key Sema personel. But he also said that Schlumberger had not rummaged through all the closets in its 10 days of due diligence.
``It was actually a bit longer than 10 days because we had been talking for a while. We didn't look in all the closets, but tell me an acquistion in which a company has done,'' said Baird.
Sema's main problem, stemming from the poor performance of last year's takeover of mobile phone billing company LHS which failed to grow, was looked at.
``The conclusion was: 'Yes, Sema had problems with LHS, but it has been stabilised and will be well in 2001','' Baird said.
Bonelli said Sema would benefit from the postponement of third generation mobile phone networks as it would be able to milk its existing second generation billing technology, and extensions for 2.5 generation mobile networks.
``For 2.5G we're in pretty good shape,'' Bonelli said.
SYNERGIES?
Analysts have difficulty seeing synergies between Schlumberger, an oil exploration technology company which also has a smart card business, and Sema, which is big in IT services for telecom companies, banks, governments and transport firms.
Only a few months ago, that view did not appear dissimilar to Schlumberger's own.
In fact, Baird said that Schlumberger had only seen opportunities for one or two joint ventures when it was talking to Sema last year, before Sema had to give up the notion of independence after it issued a profit warning on 25 November.
``We (Baird and Bonelli) discarded a couple of ideas, but we retained utilities and telecoms as the most attractive,'' Baird said.
Schlumberger wanted to expand its only major non-oil business, the smart card unit, with services. With these it could offer complete solutions to public transport companies looking for automated payment services and telecom operators who want to sell personalised mobile phones.
Schlumberger was also looking for integration and outsourcing skills to complement its oil services.
In networks it saw some potential synergies, as Schlumberger was already pioneering security smart cards, and needed services to implement entire systems.
NO TAKEOVER INTENDED
Schlumberger had not intended to buy Sema. ``We wanted to take a stake. 20 percent would be appropriate,'' Baird said.
However, after Sema's profit warning shareholders wanted to realise the value that was still in it, and urged to put it up for sale. Schlumberger stepped in to cut off rival bids.
``We did not want the company to fall in the hands of others, and the corporate culture is very similar,'' Baird said.
Both companies have multi-national headquarters, are technology-focused and are led by engineers.
``It would have been difficult to find this fit with one of our competitors,'' Bonelli said.
Sema had also talked to Cap Gemini, and Schlumberger has held talks with PricewaterhouseCoopers, U.S. service providers and SAIC. |
