CGI wins over Cognicase shareholders

CGI Group Inc. finalized the acquisition of Cognicase Inc. on Tuesday, but the integration roadmap has yet to be completed.

More than 90 per cent of Cognicase’s 71.5 million outstanding common shares were tendered before the midnight

deadline. CGI first announced its bid for the rival firm last month.

Neither company is a stranger to acquisitions, but CGI director of media relations Eileen Murphy says this is a first for the Montreal-headquartered services firm.

“”This is our largest acquisition and it’s also the first time we’ve done an unsolicited bid like this. So the process is quite different, it’s very legal-schmegal,”” Murphy says.

CGI has bought almost 40 companies in the past 15 years and prior to this deal had always had access to the company’s books before proceeding. Now that the offer has been accepted Murphy says it has full access to any and all documents. To say CGI headed into the deal blind would be inaccurate, however. The National Bank, for example, was Cognicase’s largest shareholder and client — 15 per cent shareholder, 14 per cent of revenue — and had signed a lockup deal with CGI.

Murphy says the integration is expected to take between three and six months, a time frame she admits is aggressive. “”Usually with acquisitions we tag six to nine, six to 12 months, but because so many of the operations are in parallel, we play in the same sandbox so to speak, so we know very well the people,”” she says.

As far as layoffs, buy outs, and executive and management re-structuring are concerned, Murphy says it’s too early in the process to know what will happen.

Evans Research Group analyst Albert Daoust says the real danger in the merger isn’t the fact the bid was unsolicited, but Cognicase’s past acquisition history. He says it has acquired 50 companies in the last four years and grown from $10 million a year in revenue to $500 million. These deals are also of interest to the Quebec Securities Commission, which asked the company hand over information on acquisitions made in the past four years.

“”CGI is a large stable company with a history of proceeding in a deliberate and methodical fashion,”” he says. “”This one last event (an unsolicited bid) is unlikely to determine how it’s going to go; it’s more likely how the previous five years and 50 acquisitions were done. That is where the tale is going to be told.””

CGI’s quarterly meeting will be Web cast on Jan. 28.

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