LogicaCMG launches £389m rights issue

Listen to this article

00:00
00:00

LogicaCMG, the Anglo-Dutch IT services group, said it would launch a rights issue to raise £389m ($700m) to fund its planned £631m acquisition of French rival Unilog to create a top 10 IT service provider in Europe.

The fully underwritten rights issue is on a two-for-one basis and will be priced at 107p each, a 36 percent discount to the closing share price of 168p on Friday.

LogicaCMG has said it agreed to buy about 32.3 percent of Unilog from certain members of the management and others for €255.4m in cash and the issue of 19.6m new shares. It will pay €73 in cash for each Unilog share, representing a premium of about 11.5 per cent over the one month average Unilog share price on September 15.

The deal, which will create the number four IT services player in the French market, is expected to be earnings enhancing in the first full year and achieve operational synergies of about £19m in the year ending December 31, 2007, half of which should be realised by the end of 2006.

Shares in LogicaCMG, which fell 6 per cent to 168p on Friday over concerns over a potential cash call, rose to 173¾p early on Monday morning in London.

The acquisition of Unilog, which does IT work for a number of large French corporations such as Total, EDF and Vivendi, is designed to bolster LogicaCMG’s underweight operations in France and Germany.

Martin Read, Chief Executive of LogicaCMG, said: “Through the merger of Logica plc and CMG plc in 2002 we created a strong player in the European IT services market, particularly in the UK and the Netherlands. With the acquisition of Unilog, we strengthen this position further, by becoming a major player in France, Europe’s third largest IT services market.”

LogicaCMG’s French operations currently account for 7 per cent of revenues and are expected to incur a loss of some £8.2m this year. In contrast, 81 per cent of Unilog’s revenues come from France, with profit margins of about 10 per cent.

The Paris-based company also has substantial operations in Germany and will help lift LogicaCMG’s revenues in that region by nearly 75 per cent.

For Unilog, the deal will bring international scale at a time when large customers are increasingly looking to work with IT companies with a multinational presence

Gérard Philippot, President of Unilog, said: “By combining with a leading international IT services player such as LogicaCMG, we will have improved strength and scale to compete on major international contracts and to support our prestigious clients globally.”

Mr Philippot will join the board of LogicaCMG as a non-executive director under terms of the agreement.

The acquisition, which is subject to shareholder approval in a meeting to be held on October 13, will be the largest the group has made since it was formed in a £950m merger between Logica and CMG in 2002.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.