Canadian IT company CGI Group Inc. (GIB,GIB-A.TO) on Thursday said it has agreed to acquire UK-based peer Logica Plc (LOG.L) for 105 pence per share in cash. Following news, Logica shares are soaring some 64 percent in London.
According to CGI, the deal, which values Logica at about 1.7 billion pounds (C$2.8 billion), would create a global technology champion with significant presence throughout the Americas, Europe and Asia.
CGI expects the acquisition to be immediately and significantly accretive in the range of 25 to 30 percent to its adjusted earnings per share.
The offer price represents a premium of approximately 59.8 percent to Logica's closing price per share on Wednesday and 49.6 percent Logica's one month average closing price.
As per the terms of the recommended deal, CGI's unit CGI Holdings Europe Limited will acquire Logica by way of a scheme of arrangement.
Logica's board considers the terms of the transaction to be fair and reasonable and intends unanimously to recommend that its shareholders vote in favor of the deal.
Logica, with around 41,000 employees, provides business consulting, systems integration and outsourcing to clients including European oil and gas companies, utilities and telecoms companies. For fiscal year 2011, Logica reported revenue of 3.9 billion pounds and adjusted operating profit of 114 million pounds.
In early May, Logica reported a decline in first-quarter revenues and said it expects a subdued second quarter given the impact of elections in several countries and a cautious economic outlook for its main markets. However, the firm maintained growth forecast for full year noting good progress in delivering against current contracts as well as winning and implementing new business.
Logica's main European markets currently face considerable economic uncertainty, which affects confidence and demand from both public and private clients. In this scenario, Logica Directors consider the proposed combination has a strong industrial logic.
Commenting on the acquisition, CGI Chief Executive Officer Michael Roach said, "This announcement is consistent with our profitable growth strategy...We believe we have found the right acquisition at the right price and at the right time to create one of the very few truly independent global end-to-end technology services providers."
CGI noted that the combined business would deliver integration benefits totaling C$200 million by the end of the third financial year following completion. These benefits would be realized at a one-off cost of C$265 million over three years.
CGI expects to fund the transaction through the issuance of subscription receipts and debt funding from certain Canadian banks.
In London, Logica shares are currently gaining 42 pence or 63.93 percent to trade at 107.70 pence.
In the U.S., CGI shares closed Wednesday's trading at $20.42, down $0.11 or 0.54 percent.
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