MARKET COMMENT
A Very Full Price For Sema

By Stuart Watson (TMFTiger)
February 12, 2001

After numerous press leaks, Schlumberger's (NYSE: SLB) offer for the Anglo-French IT services group Sema (LSE: SEM) was finally made public today. The offer consists of 560p in cash, valuing Sema at £3.6b, or about 45 times expected profits when Sema reports its full-year figures for 2000 next Tuesday.

That seems extremely generous for such a low-growth accident-prone company. It seems unlikely that anyone will come in with a higher offer, although there are rumoured to be a number of interested parties like Cap Gemini of France and EDS (NYSE: EDS). Sema has said that although it has received indicative expressions of interest, Schlumberger was the only company to make a formal offer.

Two of Sema's major shareholders, France Telecom and BNP Paribas, have already accepted the offer. They account for 22% of the shares between them. It seems safe to assume that Sema's life as an independent company is all over bar the shouting. Sema shareholders may want to send the management of Schlumberger a Valentine's Day card considering that the shares slumped as low as 250p only a few weeks ago.

It's unlikely that there will be a rush of further takeovers in this sector although this does show that the industry is still seen as attractive over the long term, despite the slower growth expected in the next couple of years. The froth that built up this time last year has been mostly blown away. Major players that lose their way still have their attractions to larger predators. But it is unlikely that smaller players can enjoy a similar safety net as many are simply too small to be worth buying.

Where Next?

Sema For Sale
Sema discussion board
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