The proposed £512m takeover of IT services company CMG by its
rival, Logica, is to go ahead, the two companies announced on
Tuesday.
The merged company would create Europe's second largest, publicly
traded IT services company and a leading provider of mobile
messaging software.
A combined Logica and CMG would create cost savings, allowing the
new company to compete more effectively with rivals such as EDS and
Cap Gemini, said Martin Read, Logica group managing director and
proposed group chief executive of the new company.
Read said the combined company would lose 1,400 jobs - some 6% of
the workforce - and conceded that integration would be a challenge.
The combined group would have just under 24,000 employees after the
merger, with operations in 34 countries, Read said. It would become
a global player in software for wireless messaging and payments,
with particular strength in the government sector, he added.
"Together we will be a major force in the public sector. Our
combined strength will allow us to win a larger number of
government contracts in that sector than we would have done
individually. The merger gives us a bigger scale to take on bigger
works," he said.
Last year, Logica and CMG had combined sales of £2.15bn and
together the companies would share 250 clients worldwide, including
Ford, Volkswagen, Philips, Barclays, Abbey National, the Department
of Trade and Industry, the Ministry of Defence and the Crown
Prosecution Service.
The companies said they expected to finalise the deal by the end of
the year pending standard shareholder and regulatory approval.
The move intensifies the drive to industry consolidation following
IBM's takeover of PwC Consulting, the consulting division of
PricewaterhouseCoopers, in a £2.2bn deal.