French IT services firm Steria has agreed to acquire UK outsourcing supplier Xansa for £472m in a deal that will create a combined company with sales of more than £1bn.

Steria says the merger will strengthen its position in the UK IT market and enable it to become one of the top 10 IT service providers throughout Europe.

Xansa will provide the merged company with an increased presence in the financial and public sectors and greater scale to compete for big customers.

The acquisition will be a major step in the development of Steria’s strategic plan, says chief executive Francois Enaud.

‘Focused on the fastest-growing market segments, the new group will be one of the most attractive in the IT services sector, both through the value of its service offering and its delivery model,’ he said.

The merger is also in the best interests of Xansa, says acting chief executive Bill Alexander. The deal offers its 8,000 staff an opportunity to be part of a pan-European company that delivers both onshore and offshore services.

The acquisition will strengthen Steria’s UK presence, says Ovum analyst Dominique Raviart, where it has largely been confined to the local government sector.

‘Thanks to Xansa, Steria will greatly improve its services range and will be among the largest IT services providers in the UK behind Siemens and before Tata Consultancy Services (TCS),’ he said.

‘We think the timing of the operation is right. Xansa has a well-established offshore presence, and it now has a successful delivery model that blends onshore and offshore capability for its customers.’

Steria will benefit from Xansa’s Indian operation, says Raviart, as it has already begun setting up its own presence. He says Xansa will be able to accelerate growth in India ahead of rivals Atos Origin, Fujitsu Services or LogicaCMG.