CGI to swallow Logica in £1.7bn deal

Union consistent with consolidation of global IT services market, claims Canadian firm

Anglo-Dutch IT services powerhouse Logica is set to be gobbled up in a £1.7bn cash deal unanimously recommended by its board.

Canada-based IT services outfit CGI has announced a 105p-a-share offer for the London-listed firm in a deal that will also see it assume Logica's net debt of £322m. The offer – which stands at roughly 6.6 times Logica's EBITDA last year – represents a 59.8 per cent premium on Logica's closing share price yesterday.

The deal, which CGI hopes to close in September, will create an IT services monster with 72,000 staff in 43 countries and revenue of C$10.4bn (£6.5bn).

CGI president Michael Roach said the acquisition is consistent with his firm's belief that global consolidation of the IT services market is "both necessary and inevitable".

"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," he said.

Since the offer, Logica's share price has soared above CGI's offer price, leading some commentators to speculate that other bidders will emerge and that CGI will have to up its offer.

In December, a struggling Logica announced it would slash 1,300 jobs. Tom Reuner, principal analyst at Ovum, said the firm had long been mooted as an acquisition target given the challenges it had encountered in execution and its cost structure.

The identity of the acquiring firm is a surprise though, Renuer added.

"India-based providers have made a lot of noise of eyeing acquisitions in continental Europe," he said. "But as with CGI, the bidder might not always be the obvious choice. And last but not least, a bidding war – as with Axon – should not be ruled out."