Logica To Be Sold To CGI For £1.7bn

Troubled UK-based IT services firm Logica is set to be acquired by Canadian IT business CGI for £1.7 billion.

The merger will create a sizeable company, consisting of 72,000 workers across 43 countries, and CGI believes it is set to create “a global technology champion.”

CGI will also be swallowing up a healthy amount of Logica’s debt, which stood at £322 million at the end of 2011. That means the overall cost to CGI stands at around £2 billion.

‘Right price, right time’

“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,” said Michael E Roach, president and CEO of CGI.

“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.”

It is anticipated that the acquisition will completed by the end of September 2012.

Logica has been a prime target for an acquisition, although it has had a difficult year. In April, executives waived bonuses partly because of redundancies at the firm. In 2011, Logica made 1300 redundancies, while operating profits dropped from £272 million to £114 million.

Analyst reaction has been mixed, with Ovum suggesting it was not much of a surprise given the problems at the IT company.

“Given the pressure on its share price after the last earnings announcement, the move is hardly a surprise. More of a surprise is the company who announced its intention to acquire one of the last British IT stalwarts,” said Tom Reuner, principal analyst at Ovum.

“Geographical scope and portfolio are complimentary. Both organisations have a strong focus on financial services and public sector and both are deeply entrenched in BPO.

“In these verticals the new organisation has the potential to become a leading global player, but the challenges will lie in the integration and the cost structure, given that both organisations have only limited global sourcing capabilities.”

The last British IT firm to be sold for over £1 billion was Autonomy, which HP bought for £6.7 billion. Autonomy’s former CEO Mike Lynch recently left HP amidst massive cuts at the Silicon Valley giant.

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