Keppel T&T of Singapore has announced it has bought a 20% equity stake in US IT services company, Computer Generated Solutions (CGS). Keppel paid $80 million for the investment, which includes an option to purchase a further 10% of the US firm within three years for either $40 million or $50 million depending on the date of exercise of the option.
Keppel T&T will issue 75 million new shares to pay for the deal. The new share issue constitutes just over 16% of the firm's issued and paid up capital. This placement is subject to the approval of the Singapore Exchange.
"This is a very important and major investment for Keppel T&T," said Ng Eng Ho, managing director of Keppel T&T. "Our strategic partnership with CGS provides us with the critical and comprehensive IT capabilities from which we can mould and aggressively grow all our e-business initiatives."
As a result of the investment the two firms have also announced plans to form a 50-50 joint venture called CGS Asia to provide IT services throughout the region. The firm aims to earn revenues of $145 million to $175 million by 2004.
The investment comes at a time when many of Singapore's leading companies are aggressively expanding abroad. Well aware that competency in Singapore is not enough for companies of their stature, domestic heavy weights such as Development Bank of Singapore (DBS), Singapore Airlines, Singapore Telecom and Singapore Power have all been assiduously buying stakes in foreign companies.
Despite the fact that Singapore sees its role as the hub of South East Asia, most Singapore companies have actually preferred to invest in OECD countries. The airline has invested in firms from the UK and New Zealand, the power company has invested in Korea and Australia and DBS has been heavily expanding into Hong Kong. The exception has been Singapore Telecom which has been trying to make acquisitions just about everywhere in Asia.
Speaking at the closing of the deal, Keppel's Ng commented that "With CGS, we can now build Keppel T&T into the leading regional e-business service provider with a global reach. CGS also allows us to extend our reach into the United States."
