Japan's NTT to buy Dell's IT division for $4 billion

Acquisition will allow it to raise its presence in US, boost its consulting services business

TOKYO • Japan's NTT Data Corp said yesterday that it has agreed to buy Dell's information technology consulting division for more than US$3 billion (S$4.1 billion), to expand in North America and bolster its services business.

The move will allow US computer-maker Dell to trim some of the US$43 billion debt it is taking on to fund its pending cash-and-stock acquisition of data storage provider EMC Corp, a deal worth close to US$60 billion.

The Japanese company said it will pay around US$3.05 billion, an amount that excludes debt and unspecified advisory fees.

The sale will also offer NTT Data, one of the world's largest technology services companies, a bigger foothold in the United States, where it is looking to expand in healthcare IT, insurance and financial services consulting.

"With this acquisition, we look forward to raising our presence in the US, in the largest IT service market," Mr Kazuhiro Nishihata, director in charge of global business at NTT Data, told reporters in Tokyo yesterday. The company has not yet decided how to fund the purchase, he said.

The move will allow US computer-maker Dell to trim some of the US$43 billion debt it is taking on to fund its pending cash-and-stock acquisition of data storage provider EMC Corp, a deal worth close to US$60 billion.

NTT Data has spent more than 72 billion yen (S$869 million) buying companies since 2011, about 62 billion yen of it outside Japan, based on data compiled by Bloomberg. Overseas sales had risen to 450 billion yen by the year ended March 31 last year, compared with more than 208 billion yen in the 12 months to March 2012.

Global rivals of NTT Data, including Cognizant Technology Solutions, Tata Consultancy Services and Atos, also previously participated in an auction for Perot Systems that failed to generate a deal, reported Nikkei, Reuters and the website re/code, which all cited people familiar with the matter.

Dell has also made progress in syndicating US$10 billion of its financing package for the EMC acquisition, dubbed "term loan A", people familiar with the situation said earlier.

The group of banks participating in term loan A has been expanded from the original eight underwriters to 25, with more expected to join before the syndication is completed in the next week, the sources said.

Formerly known as Perot Systems, Dell's IT services division is a major provider of technology consulting to hospitals and government departments.

Founded in 1988 by former US presidential candidate Ross Perot, it was acquired by Dell in 2009 for US$3.9 billion.

However, Dell has since divested some of the unit's operations and integrated some others, which it is not including in the sale. Some of the unit's capabilities were seen by Dell as redundant, in the wake of the acquisition of EMC.

Dell has also been speaking to private equity firms about selling Quest Software, which helps with information technology management, as well as SonicWall, an e-mail encryption and data security provider. Together, Quest and SonicWall could be worth up to US$4 billion.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on March 29, 2016, with the headline 'Japan's NTT to buy Dell's IT division for $4 billion'. Print Edition | Subscribe