Shares in defence group Thales rose on Monday after chipmaker Gemalto accepted the French company`s 4.8 billion euro ($5.66 billion) takeover bid to create a leader in digital security.
Thales` chief executive Patrice Caine made his move just days after Gemalto had knocked back a 4.3 billion euro offer from French rival Atos.
Thales shares surged 7.81 percent to 93 euros at 0952 GMT, while Amsterdam-listed Gemalto`s shares were up 5.47 percent at 49.38 euros, just below Thales` 51 euro per share basic offer.
The planned merger highlights the increasingly blurred lines between industrial and software companies as they try to grab a share of the fast-growing digital security market.
"In terms of DNA, the two companies look much more alike," said Richard-Maxime Beaudoux, an analyst at Bryan, Garnier & Co.
"It`s not a financial deal, which was the case for Atos. They gave it a try, it was opportunistic."
The takeover ends a difficult year for Gemalto, which has made a series of profit warnings that hurt its shares and overshadowed its attempt to shift from a slowing market for phone SIM cards towards security services such as data encryption and biometric passports.
"Our intention is to keep all of the assets in Gemalto`s portfolio," Caine said in a call with analysts, suggesting that SIM card operations remained core alongside Gemalto`s growing focus on cybersecurity.
Thales forecast that Gemalto`s revenues would grow 5 percent annually and said it expected Gemalto`s EBIT margin to exceed its own within two or three years of the merger.
Under the deal, unanimously recommended by the boards of both companies, Thales will merge its digital assets with Gemalto to create a business headed by Gemalto CEO Philippe Vallee.
Vallee on Monday said he would stick to a plan to cut 288 jobs in its struggling SIM card business in France.
"This plan is maintained," he told BFM business radio, adding that he would try to redeploy staff internally where possible.
Caine later told a news conference that Gemalto`s staff would have the opportunity to get jobs at Naval Group, part of Thales.
Atos said it would not engage in a bidding war but would be open to further discussions with Gemalto should the Thales deal collapse.
($1 = 0.8485 euros)
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