LogicaCMG plc announces an offer to acquire the entire share capital of WM-data, a leading Nordic IT services provider.
The WM-data Board of Directors has unanimously recommended that WM-data Shareholders and WM-data Convertible Debenture Holders accept the Offer.
The Offer values WM-data at approximately SEK 11.9 billion (£882 million), equivalent to SEK 27.75 per WM-data Share, and represents a premium of approximately 25 per cent. over the average closing middle market price of SEK 22.2 (£1.64) per WM-data Share for the preceding three months.
The proposed transaction will significantly strengthen LogicaCMG's position as a major international force in IT services. The Enlarged Group would have almost 40,000 employees in 41 countries and would have had combined revenues for the year ended 31 December 2005 in excess of £3 billion. It would be a global top twenty company in terms of IT services revenues and the seventh largest in Europe. It would be the second largest listed IT services company in Europe by market capitalisation.
There is a strong strategic rationale for combining the two businesses:
Customers are increasingly seeking to do business with a smaller number of larger suppliers who can provide them with a broader range of products and services and who can support them internationally. The acquisition of WM-data would significantly increase the scale of LogicaCMG, providing a fourth significant profit generator in Europe. The Enlarged Group would employ approximately 9,000 people in the Nordics, 8,000 in France, 6,000 in the UK and 6,000 in the Netherlands. The proposed transaction is intended to give LogicaCMG even greater strength and scale to win big global contracts.
The Nordic market is an attractive IT services market. It is technologically advanced with high IT usage rates. In 2005, the Nordic region was the fourth largest European market (after Germany, the UK and France) for IT services expenditure. The overall expectations for the IT services market in the Nordic region are for growth of approximately 6 per cent per annum.v LogicaCMG currently has only a limited presence in the Nordic region. This transaction would give LogicaCMG a strong position in this important IT services market.
WM-data's deep and long-term client relationships would provide LogicaCMG with a conduit for selling its worldwide differentiated offerings in the Nordics. The Directors believe that the transaction would also provide LogicaCMG with the ability to extend contracts with existing pan-European customers that have operations in the Nordic region.
WM-data has identified the need for an offshore delivery capability and has established small nearshore operations in Estonia and Poland. LogicaCMG's outsourcing strengths, particularly in India and central Europe, are anticipated to provide WM-data with an enhanced offshore delivery capability, helping WM-data to grow faster in the outsourcing market.
There is a good cultural fit between the two organisations. The Directors believe that both companies have long and successful histories, similar culture and values and enjoy competitive advantage based on technical innovation, excellent industry knowledge, proven reliability in service delivery and a focus on profitability.
Crister Stjernfelt, currently President and CEO of WM-data, has agreed to become an executive member of the Board of LogicaCMG and will join LogicaCMG's Executive Committee with responsibility for the Nordic region on completion of the Acquisition, subject to the Offer becoming unconditional.
For every 100 WM-data Shares tendered, each WM-data Shareholder will be entitled to receive 95 New LogicaCMG Shares and SEK 557 in cash (equivalent to 0.95vi New LogicaCMG Shares and SEK 5.57 in cash per WM-data Share). WM-data Convertible Debenture Holders will be entitled to receive 95 New LogicaCMG Shares and SEK 557 in cash for each SEK 2,100 nominal value of WM-data Convertible Debentures that they hold.
WM-data Shareholders with 500 or fewer WM-data Shares and WM-data Convertible Debenture Holders who are entitled to 500 or fewer WM-data Shares on conversion of their WM-data Convertible Debentures are entitled to elect to receive guaranteed cash consideration as an alternative.
WM-data's two largest shareholders, Investor AB and a WM-data founder, Thord Wilkne, and certain WM-data senior managers, have given irrevocable undertakings to accept the Offer in respect of their aggregate holding of 97,549,250 WM-data Shares representing in aggregate approximately 23.2 per cent. of WM-data's current issued ordinary share capital and 53.2 per cent. of the voting rights attaching to such share capital.
Annualised cost savings are expected to be approximately £15 million. Half of the estimated annualised cost savings are expected to be delivered in the year ending 31 December 2007, with the full annualised cost savings of approximately £15 million expected in the year ending 31 December 2008 and in subsequent years. Costs to achieve these savings are estimated at £22 million over two years, most of which is expected to be incurred in 2007.
The Acquisition is expected to enhance LogicaCMG's earnings per share in the first full year, and to cover LogicaCMG's cost of capital in the second full year following completion of the Acquisition.
Commenting on the proposed acquisition, Crister Stjernfelt, President and Chief Executive Officer of WM-data, said:
"By combining with LogicaCMG, which is a leading international IT services player, WM-data will strengthen its competitiveness and be able to give global support to both existing and new customers. With access to LogicaCMG's global sourcing model, we can strengthen our offering within outsourcing and make our product development more efficient. For our employees this deal provides an opportunity to extend their expertise and develop as part of a growing and dynamic enterprise with a strong international outlook. This transaction will mark a new and exciting phase in the long and successful history of WM-data."
Dr Martin Read, Chief Executive Officer of LogicaCMG, said:
"Increasingly, our customers want to do business with a smaller number of larger suppliers who can provide them with a broader range of offerings and support them internationally. The acquisition of WM-data will further strengthen LogicaCMG's market position and its ability to win large global contracts.
WM-data's leading position in the Nordic region will complement our existing strong positions in the UK, the Netherlands and France. The geographical overlap between the two companies is minimal and there are significant opportunities to cross-sell products and services across the two businesses. There is also a strong cultural fit between the two organisations.
The Enlarged Group will become a global top 20 company in terms of IT services revenues and the 7th largest in Europe. Our increased capabilities and scale will further strengthen our ability to seize opportunities in the rapidly changing global IT services market."