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Business deals

NEC buys Danish IT leader to bolster e-government business

Japanese company taps KMD's experience in servicing European public sector

NEC President and CEO Takashi Niino attends a news conference Thursday on his company's planned acquisition of Danish IT company KMD. (Photo by Kei Higuchi)

TOKYO -- Electronics maker NEC will acquire KMD Holding, Denmark's largest information technology business, as the Japanese company aims to tap growing public-sector demand for digital services.

NEC will buy the company from U.S.-based private equity firm Advent International for about 8 billion Danish kroner ($1.22 billion), the Japanese company said Thursday. The deal, NEC's second-biggest acquisition ever, is expected to be completed at the end of February.

As European governments accelerate their shifts to digital services, NEC looks to make KMD's software a common platform by combining it with NEC's own biometric and other technology.

KMD has helped implement Denmark's world-leading digital government initiatives, including sharing of tax and other data among ministries and agencies. The company boasts a 17% share of the market for central government IT systems and 43% for local governments.

"Through this acquisition, NEC will acquire a business model that leverages platforms in the digital government domain," NEC President and CEO Takashi Niino told reporters.

KMD reported 5.64 billion kroner in group revenue for 2017. Though the company logged a 54.5 million kroner operating loss, owing in large part to restructuring costs, it is expected to return to the black next year.

NEC has outlined plans to spend 200 billion yen ($1.81 billion) on overseas acquisitions. It bought U.K.-based IT services company Northgate Public Services in January 2018 for 475 million pounds ($600 million at current rates).

But the Japanese company's earnings have languished of late as it has been slow to make necessary changes to its business structure. NEC has taken steps toward restructuring, including offering voluntary retirement packages to lower its payroll costs, and is now going back on the offensive.

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