TCS to acquire Deutsche Bank’s Technology Unit for 1 euro
Tata Consultancy Services Ltd. will acquire Deutsche Bank AG’s technology services business as the Tata Group flagship looks to strengthen its growth outlook in Germany.
India’s biggest software exporter by market value will acquire 100% of the shares of Postbank Systems AG from Deutsche Bank, according to an exchange filing. The Bonn-based PBS—the full-range captive IT service provider that offers project management, application management and infra management services exclusively to Postbank and other subsidiaries of Deutsche Bank—and its around 1,500 employees will become part of TCS.
The transaction is expected to close by December 2020, subject to requisite approvals, and will support TCS’ growth plan within Germany and across Europe, the filing said. The deal even paves the way for fetching more business in other transformational and strategic projects with Deutsche Bank and will drive tech-led transformation of DB Private Bank.
“We are pleased to deepen our long-standing partnership with Deutsche Bank, continue to help accelerate their digital transformation, and to acquire market-specific capabilities in the banking domain,” NG Subramaniam, chief operating officer and executive director at TCS, was quoted as saying in the filing. “We welcome Postbank Systems’ IT professionals into the TCS family and invite them to avail of the learning and development opportunities here and help script the next chapter of TCS’ growth in Germany.”
Last month, Bloomberg, citing people aware of the matter, had reported that Deutsche Bank AG was in advanced talks to sell Postbank to TCS. The takeover, the report said, will help Deutsche Bank Chief Executive Officer Christian Sewing to get closer to his job-cuts target. Sewing, according to a separate Bloomberg report, in May had said the investment bank would resume its restructuring plan centered on cutting 18,000 jobs, with about half of those expected in Germany. The plan was unveiled last year but was put on hold due to the coronavirus outbreak.
“As part of our move to one technology organisation, we are consolidating the IT platform for our retail banking brand Postbank into the Deutsche Bank platform,” Bernd Leukert, chief technology, data, and innovation officer at Deutsche Bank, was quoted as saying in the filing. “With this transaction, we agreed on a structure that meets all parties’ interests. It provides clarity to Postbank Systems staff and the opportunity to become part of the success and growth story of TCS.”
The deal is similar to TCS’ takeover of Citigroup Inc.’s back-office unit during the 2008 global financial crisis. The Indian company had paid $505 million to acquire Citigroup’s unit in what was then its biggest acquisition. Financial details of the transaction with Deutsche Bank, however, aren’t revealed.
According to Axis Capital, it should be viewed as a large deal win with a total contract value of $500 million over five years. While revenue post 2021 is expected to dip at a steep rate, incremental business from other transformational projects is expected to offset these pressures. Moreover, current low- to mid-single digit margin structure of Postbank Systems is expected to gravitate to the company’s level over period of the contract, the brokerage said, as it retained its ‘add’ rating on TCS with a target price of Rs 3,050 apiece.