IT services company CGI is to acquire fellow outsourcer Logica for £1.7bn.
The deal, announced on Thursday, would see CGI pay £1.05 per share for Logica and take on its debts of £322m.
The acquisition of Logica will allow the Canadian-headquartered CGI to extend its reach into the UK and Europe. CGI expects make £125m a year in savings after its integration with Logica, after a one-off cost of £165m over three years.
According to Richard Holway, chairman of analyst TechMarketView, it will not be easy to make a success of the deal.
"CGI is an established Canadian SITS company with 31,000 employees and revenues of C$4.3b (around £2.6bn) — ie. much smaller than the circa £3.9bn revenues at Logica. CGI has very little revenue overlap with Logica's UK and European operations.
"However, this is a huge acquisition for CGI. Acquisitions where the company being bought is less than 50 percent of the size of the acquirer almost always fail. CGI is actually smaller than Logica... On top of the CGI is not exactly a star performer — itself reporting declines in revenues and profits yesterday," he wrote in a blog post.
Posted by Jo Best