CGI president and CEO, Michael Roach, said: "This announcement is consistent with...our belief that global consolidation of our industry is both necessary and inevitable. Logica is a leading business and technology service company with talented and committed employees and long-term client relationships...In addition to operational breadth and depth, the combined business will have critical mass and key blue chip client relationships."
Logica Chairman, David Tyler, said: "Competitive intensity has increased as the industry has globalised and scale has become an ever more important factor in cost competitiveness and service. Additionally, in Logica's main European markets there is considerable economic uncertainty, which affects confidence and demand from both public and private clients...The Logica directors consider there to be a strong industrial logic for the proposed combination with CGI.
"It meets clients' requirements for a more comprehensive international presence and offers them the benefits of scale. Given the very limited geographic overlap and CGI's strong reputation for successful integration, we believe this transaction will offer great opportunities for Logica's people. For our shareholders, the offer represents an opportunity to realise a substantial premium in cash to the current share price."
He added: "Over the past few years Logica has successfully integrated its European businesses into a single organisation with a clear brand and position in its main markets. Significant investments have been made in sales and marketing.
"It has established a strong presence in outsourcing which now represents 45 percent of the business. Logica has also cut overhead and staff costs substantially and offshore numbers have more than doubled, improving its cost competitiveness."
Commenting on the announcement, Ben Kolada of research firm The 451 Group, said: "This transaction takes the cake as being the largest cross-border deal [in the consolidation of IT services firms] since NTT bought Dimension Data in July 2010 for $US3.2b."
He added: "CGI is buying Logica as a pure geographic move meant to diversify its revenue globally. Currently, CGI's revenue is split about half and half between the US and Canada, with only six percent coming from Europe. Logica, on the other hand, generates almost no revenue from North American operations.
"Its revenue mix is heavily slanted toward Western Europe, with its top three markets by country being France, the UK and Sweden. If and when the deal closes, the combined company will have a presence in 43 countries. The transaction will also more than double CGI's revenue, creating the sixth-largest IT services provider worldwide."
In Australia CGI has offices in Sydney, Melbourne, Canberra and Brisbane and a range of blue chip clients that, in the telco space includes Telstra and VHA.
Logica has been in Australia for 30 years and claims to be "the number one IT services provider to the utilities Industry in Australia (source IDC, 2009) with clients including: 11 of the 13 energy network companies, seven of the eight gas companies, and nine of the 14 water companies." It employs almost 1000 IT specialists and consultants and has offices in every capital city except Darwin and Perth.