MONTREAL—Montreal-based CGI Group will become the sixth-largest IT services provider in the world after a $3.1-billion acquisition of a U.K. firm.
Already Canada’s largest IT services company, CGI will pay $2.8 billion for IT services firm Logica PLC. It will also assume $515 million debt.
The combined company will have approximately 72,000 professionals in 43 countries and revenue of $10.4 billion. CGI currently has about 31,000 employees and $4.3 billion in annual revenues.
The transaction implies an enterprise value multiple of approximately 6.6 times Logica’s EBITDA for the 12 months ended 31 December 2011, according to CGI, which was keen to increase its European footprint.
“With only about five per cent of our revenue currently being generated in these markets, the European IT market is very attractive as it represents a market of approximately $200 billion euros, or 30 per cent of the world’s IT spend,” said president and CEO Michael Roach.
Most of Logica’s revenue is derived from Europe’s largest economies, including Britain, Germany, France and the Nordics.
For shareholders, he said the transaction would be immediately accretive in the range of 25 to 30 per cent to earnings per share.
Caisse de depot et placement du Quebec, which manages funds for the province’s public sector pensions, will invest $1 billion in CGI to help finance the acquisition.
Additional debt funding of C$2.0 billion will come from Canadian Imperial Bank of Commerce, National Bank of Canada and The Toronto-Dominion Bank.
Logica’s board has unanimously agreed to recommend the deal to its shareholders.
The purchase will be effective by the end of September 2012.
CGI Group Inc. provides IT services with approximately 31,000 professionals in Canada, the U.S., Europe and Asia-Pacific. CGI’s posted $4.3 billion in revenues and its order backlog was approximately $13.1 billion.
Logica, headquartered in Reading, U.K., is a business and technology services company with 41,000 employees and market capitalization of $1.79 billion.