CGI to acquire Logica

CGI Group Inc. (Montreal, Quebec, Canada), a leading global provider of IT and business process services, has announced a recommended cash acquisition of Logica (Reading, UK) for 105 pence (C$1.68) per ordinary share equivalent to a total purchase price of £1.7 billion (C$2.8 billion) plus the assumption of Logica’s net debt of £322 million (C$515 million) as of December 31, 2011.

The combined company will have approximately 72,000 professionals in 43 countries and revenue of C$10.4 billion, offering clients across the world the best mix of business and technology expertise as well as an unmatched combination of local and global delivery options.

Michael Roach, CEO, CGI

“This announcement is consistent with our profitable growth strategy and with our belief that the global consolidation of our industry is both necessary and inevitable.  Logica is a leading business and technology service company with talented and committed employees and long-term client relationships,” said Michael E. Roach, President and CEO, CGI. “It further underscores our ongoing commitment to support our clients as they expand their businesses locally and globally. In addition to operational breadth and depth, the combined business will have critical mass and key blue chip client relationships. We warmly welcome Logica’s professionals and believe that the combined business will provide new and larger growth opportunities for employees and clients, as well as offering CGI shareholders the superior and industry leading returns we have delivered historically.”

Transaction highlights 

• Transaction represents a 59.8% premium to Logica’s closing price on May 30, 2012 (the last business day before this announcement), a 49.6% premium to the average share price over the one month period to May 30, 2012 and a 32.8% premium to the average share price over the six month period to May 30, 2012.
• Transaction implies an enterprise value multiple of approximately 6.6 times Logica’s EBITDA for the 12 months ended 31 December 2011.
• The transaction is expected to deliver substantial financial benefits through the realisation of annual integration benefits of £125 million (C$200 million) by the end of the third financial year following completion.  These benefits are expected to be realised at a one-off cost of £165 million (C$265 million) over three years. In addition, it is anticipated that further revenue opportunities will be available to the combined business through the enhanced offering of both geographic and product services to clients of both CGI and Logica.
• The transaction is expected to be immediately accretive in the range of 25% to 30% to CGI’s earnings per share excluding acquisition-related and integration costs.  The accretion rate is expected to increase throughout the three year integration period.
• Logica’s Board of Directors has unanimously agreed to recommend the transaction to Logica’s shareholders.
• Irrevocable undertakings have been received in support of the transaction in all circumstances from Logica’s directors and in certain circumstances from Logica’s largest shareholders.  Total irrevocable undertakings received represent a total of 18.19% of Logica’s outstanding shares.
• CGI will finance the acquisition within its disciplined financial framework. The consideration will be funded through a combination of:
  • 46.7 million subscription receipts exchangeable into new Class A shares in CGI at C$21.41 by the Caisse de dépôt et placement du Québec for C$1.0 billion;
  • Additional debt funding of £1.25 billion (C$2.0 billion) from Canadian Imperial Bank of Commerce, National Bank of Canada and The Toronto-Dominion Bank; and
  • Approximately C$650 million to be drawn from CGI’s existing credit facility.

Business rationale – CGI strongly believes this transaction will strengthen its capabilities across the five key attributes of a global leader in IT and business process services:

• People and culture: an exceptional and talented team driven towards the common goal of client success and, as owners, benefiting from a performance-based culture.
• Client proximity with blended global delivery: enhanced client intimacy and service delivery bringing the best capabilities and solutions to clients anywhere in the world, all the time.
• End-to-end capabilities: enhanced global offering with expanded platforms and the ability to cover the entire customer services supply chain.
• Operational excellence: proven methodologies and frameworks to ensure on-time, on-budget project delivery.
• Mission critical intellectual property: expanded portfolio of opportunities for profitable revenue growth, improved revenue quality mix and over time, increased margins.

“We believe Logica is the right acquisition, at the right price and at the right time to create one of the very few independent global end-to-end technology services providers,” added Mr. Roach.

Source: CGI