IT services provider Kyndryl is reportedly joining forces with investment fund Apollo Global to make a bid for beleaguered rival DXC Technology.

The two firms will offer between $22-$25 per share to acquire DXC, according to a report from Reuters, which cites sources familiar with the proposed deal.

DXC targeted by Kyndryl

DXC was formed in 2017 when HPE span off its services division and merged it with another vendor, CSC. It provides a wide range of IT services including managed infrastructure, and says on its website it manages 448,000 servers on behalf of its clients.

In 2019 the company reported it had "43 owned or leased sites globally, in addition to over 250 managed colo locations,” but this number is likely to have decreased since then as more customers move workloads to cloud providers. In November it said it had moved 1,000 clients to AWS, Amazon’s cloud platform.

Indeed, DXC has struggled to keep revenues up as more businesses transition to the cloud, and the last year has seen its share price drop by a third, making it an attractive acquisition target. It appointed a new chief executive, Raul Fernandez, in February.

The Reuters report says the company will look to sell its insurance software business for more than $2 billion, and could even opt to remain an independent business. It rejected a takeover bid from an unnamed private equity firm last year.

Kyndryl was formed in 2021 when IBM span off its managed services division. It claims to be the largest IT services provider in the world.

Atos agrees rescue deal

Meanwhile, another flailing IT infrastructure provider, Atos - which made its own unsuccessful bid to acquire DXC back in 2021 - has agreed a rescue package which it hopes will bring to an end years of financial uncertainty.

The company has accepted a proposal from Onepoint, the company’s largest shareholder, preferring it to a rival bid from EPEI, the investment vehicle of Czech billionaire Daniel Kretinskiy.

It will see €2.9 billion ($3.2 billion) of Atos’s debt converted into equity, with the business taking on an additional €1.5 billion ($1.6 billion) in new loans. These will include €300 million ($322 million) of bank guarantees. Onepoint, along with the company’s creditors, will inject €250 million ($268 million).

While the deal will ensure Atos remains headquartered in France, and will safeguard jobs at the business, the move is more bad news for the company’s shareholders, who will see the value of their holdings massively diluted as the company’s total share capital is increased.

Atos has been struggling to cope with a mountain of debt for several years, and the business also revealed this week it is selling its Worldgrid unit to engineering consulting group Alten for €270 million ($289.9m)

Worldgrid provides consulting and engineering services to energy and utility companies and employs more than 1,100 people.