Tech Industry

Buy would bolster HP services business

But Hewlett-Packard could face a rival bidder for Synstar, an IT services company based in Britain.

Hewlett-Packard plans to acquire IT services company Synstar for $297 million in cash, the companies said Monday.

Shares in Britain-based Synstar soared by more than 25 percent in value in trading Monday.

Synstar's board has already recommended that shareholders accept the offer, which was announced Monday. HP is offering to pay $1.84 (100 pence) for each Synstar share, which represents a premium of around 28 percent compared with the $1.44 that Synstar closed at Friday.

Synstar provides infrastructure and hardware support for companies with around 2,000 to 5,000 employees.

The proposed takeover is part of HP's strategy to win a greater share of the IT services market. HP said the acquisition would improve its ability to offer end-to-end service capabilities and "further its credibility" with medium-size and large companies.

"HP believes that combining the two businesses will result in an organization better able to increase sales of IT services to its combined customer base and to access a greater share of the European multivendor market," HP said in a statement.

It's possible that HP could face competition for Synstar from a rival bidder. At present, HP has received a guarantee from Synstar's directors that they will sell their stakes--representing 0.3 percent of the overall company--even if a second bid is received.

HP says it has also received "nonbinding letters of support for the offer" from a number of institutional investors that own a further 30.2 percent of Synstar.

Graeme Wearden of ZDNet UK reported from London.