Telecoms group KPN has agreed to buy struggling information technology services company Getronics for €766 million, making it the Dutch market leader in IT services.

KPN, which also beat analysts' expectations by posting flat second-quarter core earnings yesterday, said the cash takeover offer at €6.25 per Getronics share was part of its strategy to move from providing communications links to more value-added services in the business market.

The former Dutch telecoms monopoly will spend an additional €415 million to buy back Getronics's outstanding convertible bonds maturing in 2008, 2010 and 2014 as well as preference shares, chief financial officer Marcel Smits said.

KPN shares fell 0.5 per cent to €11.21 after the deal was announced, while the DJ Stoxx telecoms index was down 0.4 per cent. Getronics shares rose more than 20 per cent to €6.15.

KPN said several hundred jobs would be cut in the deal and it expected annual synergies of €50 million from 2009. Getronics's tax losses that can be carried forward have a net present value to KPN of €100 million, it said. Rabo Securities said KPN was paying an enterprise value of around 7.5 times Getronics's forecast 2007 core earnings. "One should bear in mind that Getronics has traditionally been trading at deep discounts to its peer group," the broker said.

KPN had been in exploratory talks with Getronics last year, but reached no deal at the time.

"There have been major changes at Getronics. They have divested a lot of assets that we think they should have divested," KPN chief executive Ad Scheepbouwer told journalists. The offer is unanimously supported by Getronics's management and supervisory boards.

KPN will keep Getronics's' businesses in the Netherlands, Britain, Belgium and North America and continue the pending divestment of other non-core units, Mr Scheepbouwer said. - (Reuters)