Logica and CMG set to merge

Logica and CMG are in advanced merger talks to create one of Europe's largest quoted IT services businesses and a leading company...

Logica and CMG are in advanced merger talks to create one of Europe's largest quoted IT services businesses and a leading company in mobile messaging software.

The merger would offer "scope for significant operating cost savings across the combined businesses", a Logica board statement noted.

If the merger, which is now subject to due diligence, goes through, Logica shareholders will end up owning 60% of the new firm and CMG shareholders the remainder

The deal would put the combined group third behind Cap Gemini Ernst & Young and Atos Origin in the European IT services market.

The merger will also allow the company to compete against Nokia and Ericsson in the next-generation multimedia messaging market.

The move intensifies the drive to industry consolidation following the completion last week of IBM's takeover of PwC Consulting, the consulting division of PricewaterhouseCoopers in a £2.2bn deal.

Logica delivered £116m profits before tax for the year to June 2002 on a £1.1bn turnover. CMG posted a pre-tax profit of £40.4m in the year to December 2001 on £920.4m turnover. The combined company would have a market value of around £910m.

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