Logica has agreed to sell itself to CGI of Canada at 105p a share, or 60% more than yesterday's market price, which sounds terrific until you remember that the shares traded above 110p almost every day from autumn 2009 to summer 2011. Viewed against that backdrop, Logica is giving up its independence without a fight. Where's the ambition?
It has disappeared down the black hole of the eurozone, it seems. Two profits warnings in 12 months, coupled with no sign of a pick-up in demand for IT services in Europe, have sapped spirits. Logica has cut jobs but there's no escaping the fact that Europe's public sector (28% of revenues last year) and its financial services industry (16%) won't be increasing IT budgets meaningfully any time soon. That's the case for seeking protection under CGI's umbrella. And, when your two largest shareholders – Schroders and Artemis, with a combined 18% – want to take the cash, the hands of Logica's directors were partially forced.
But one has to admire CGI's willingness to take an opportunistic gamble on the eurozone. The acquisition is a big bet for it. CGI is worth C$5.4bn, or £3.4bn, which is twice as much as the value of its bid for Logica. But the Canadian firm is actually smaller than Logica in terms of both numbers of employees (40,000 versus 31,000) and revenues.
What breeds such confidence that it can run Logica better than the current management? That is essentially what CGI is claiming when it says the deal should be substantially earnings-enhancing from the off. Past success in North America is clearly one reason. Another may be a very stable and supportive local shareholder.
The Caisse de dépôt et placement du Québec, a pension fund manager, is increasing its stake in CGI from 14% to 22% by investing C$1bn (£630m) to help fund the bid. Canadian pension funds have an excellent record of picking winners in the UK. Their bravery in this case may or may not be rewarded. But you have to applaud the long-term thinking.
