LogicaCMG exits telecoms market

Integrator offloads its Telecoms Products division to investment consortium

Outsourcing giant LogicaCMG is in the process of selling its Telecoms Products business to an investment consortium, led by Atlantic Bridge Ventures, for £265m.

The consortium plan to revamp the business and turn it into a new company called Acision. LogicaCMG will provide a loan of £15m to Acision to fund working capital as well as providing transition services throughout 2007 to support the operation of the new business.

On completion of the transaction, LogicaCMG expects to return £130m of net proceeds to shareholders via a share buyback programme. The integrator then plans to use the remaining net proceeds to reduce debt and to fund the buy-out of some existing minority interests.

Martin Read, chief executive of LogicaCMG, said: “Over the last two years, we have significantly improved the profitability of the Telecoms Products business and developed a new product range. We have now secured an attractive sale price for the strengthened business. This divestment allows LogicaCMG to focus on its core strengths in IT and business services."

Jean-Charles Doineau, research director at analyst Ovum, said: "Though operating the largest installed base and one of the most comprehensive product portfolios in messaging, LogicaCMG didn't find an industry partner to acquire the business. There is probably a trade off between price and benefits there, but it is worth noting. Valued at between 11 and 12 times its EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization ), the company wasn't attractive enough for any of its competitors (Ericsson, Nokia, Comverse and Huawei, amongst others) to consolidate the infrastructure business. "

"At a time of consolidation in the telecoms industry, primarily driven by scale of reach, Acision, with 1,700 people operating in 22 countries, needs to revamp its product development strategy and needs much larger economies of scale. Acision's management must think very carefully about its strategy going forward," added Doineau.