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Logica to buy CMG for $793 million
LONDON, England -- Britain's Logica has agreed to buy Anglo-Dutch rival CMG for about £510 million ($793 million) to create Europe's third-largest computer services company. Logica shareholders will own 60 percent of the new company and CMG the rest. CMG shareholders will receive 0.4827 new LogicaCMG shares for each CMG stock they hold. The transaction values each CMG share at about 82.5 pence, based on yesterday's closing price. The takeover places LogicaCMG, as the new company will be called, behind Cap Gemini Ernst & Young (PCAP) and Atos Origin. The merger comes as demand for computer services decline as customers delay orders in response to sluggish economic growth. LogicaCMG said on Thursday about 1,400 jobs would go once the merger is completed. Martin Read, currently the chief executive of Logica, will become CEO at the combined group. Both Logica (LOG) and CMG (CMG) used to be members of Britain's FTSE 100 leading companies until they were dumped after interest in technology stocks waned following the collapse of the dotcom bubble and downturn in the global economy. At the same time, Logica's and CMG's stranglehold as the power behind text messaging on mobile phones has been broken by manufacturers, as Nokia and Ericsson write their own software to power the latest incarnation, multimedia messaging. "Bringing Logica and CMG together will create a powerhouse in IT services and wireless telecoms," Read said in statement. Both companies announced they were in talks two months ago. Logica said it expected annual savings of £60 million ($93 million) by the end of 2004, at a one-off cost of £80 million. LogicaCMG has combined pro forma turnover of £2.01 billion and operating profit before goodwill and restructuring of £168 million for the year ended June 30, the company said. Logica has issued a string of warnings over the last year, the last in September as it posted a 25 percent drop in profit and said it saw no end to the global technology spending slump. Logica's stock, which has fallen more than 80 percent this year, slipped 1.75 percent to 168 pence in London trading early on Tuesday. CMG's stock soared 3.25 pence, or 4.2 percent, to 80.19 pence.
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