Merger highlights
The boards of Logica and CMG announce that they have unanimously agreed the terms of a recommended merger to create LogicaCMG. Upon completion of the Merger, Logica Shareholders will hold 60 per cent. and CMG Shareholders 40 per cent. of the issued ordinary share capital of LogicaCMG.
The Merger creates:
Ø The number two European quoted IT services company;
Ø A global force in wireless messaging and payments software; and
Ø An Enlarged Group with pro forma combined turnover of over £2 billion for the 12 months ended 30 June 2002.
Including annualised cost savings, the Merger is expected to be substantially earnings enhancing (pre-exceptional items and goodwill) for Logica and CMG Shareholders in the year ending 31 December 2003.*
At 30 June 2002, the Enlarged Group had some 24,000 employees worldwide and operations in 34 countries. Combined, Logica and CMG have complementary geographical coverage, customers and key competencies, with a similar industry focus. Together, they create a powerful platform for enhanced future growth.
IT services
LogicaCMG will have a leading position in IT services in European markets, with a broad coverage of blue-chip customers across key industry sectors and an improved position with central government customers.
Strong geographic fit
Ø Major player in the UK and Benelux markets;
Ø Critical mass in Germany and France;
Ø Strengthened presence in Asia Pacific; and
Ø A strong global network.
Complementary customers and similar industry focus
Ø Enhanced IT services offering as a result of combining Logica's and CMG's vertical market expertise, particularly in the public sector, telecoms, financial services, energy & utilities and industry, distribution & transport sectors; and
Ø Broader customer coverage across a high quality, complementary customer base with limited overlap, offering opportunities for cross-selling.
Key competencies
Ø Improved position in consulting, systems integration, business process outsourcing and applications management; and
Ø Better placed to provide added-value services to multi-national customers.
Wireless telecoms
The Merger creates a strengthened global player in the rapidly evolving wireless messaging and payments software industry:
Ø Provides a stronger competitive position in new generation technologies, including multi-media messaging, unified communications, wireless Internet and mobile payments;
Ø Increases the overall customer base, with limited overlap, providing cross-selling opportunities on a global basis; and
Ø Provides an opportunity to optimise returns from research & development expenditure and to rationalise marketing, sales, distribution and back office activities.
Synergies, financial benefits and integration planning
It is expected that the annualised operational cost savings available to LogicaCMG will amount to approximately £60 million.** Approximately half of the cost savings benefit is expected to be realised during the financial year ending 31 December 2003 and all of the benefit in the financial year ending 31 December 2004. The total cost of achieving these savings is expected to be some £80 million.
A major priority of the board and management of LogicaCMG will be to achieve a successful integration of Logica and CMG that preserves the key strengths of the culture, management and business practices of each group and allows the efficient realisation of the expected cost savings. The overall integration strategy has been formulated between the two management teams and detailed planning is underway in preparation for rapid implementation following completion of the Merger. As part of this process, appropriate consultations will be made with staff and employee representative bodies in the relevant jurisdictions.
Board and management
The board of LogicaCMG will be a balanced mix of Logica and CMG executive directors. Cor Stutterheim will be Non-Executive Chairman, Helmut Mamsch will be Deputy Chairman and Martin Read will be Group Chief Executive of LogicaCMG. Seamus Keating will be Group Finance Director of LogicaCMG, Jim McKenna will be Chief Executive of the UK and Ireland, Alistair Crawford will be Chief Executive of Mainland Europe and Ian Taylor will be Group Human Resources Director.
Transaction structure and timetable
The Merger will be effected by way of a scheme of arrangement of CMG under section 425 of the Companies Act. It is expected that formal documentation relating to the Merger will be despatched to shareholders of Logica and CMG shortly and it is anticipated that the Merger will be completed before the end of the current calendar year.
LogicaCMG will continue to be listed on the London Stock Exchange and will apply for a secondary listing on Euronext Amsterdam, effective on completion of the Merger.
Commenting on the Merger, Cor Stutterheim, Executive Chairman of CMG said:
"I am delighted that CMG and Logica are joining forces to create one of Europe's foremost providers of IT services with a particularly complementary presence in wireless telecoms. Both companies have excellent reputations, blue-chip customers and talented staff. Together we will be a more powerful force, capable of delivering significant additional value for the benefit of shareholders, customers and employees."
Martin Read, Chief Executive of Logica said:
"Bringing Logica and CMG together will create a powerhouse in IT services and wireless telecoms. The new company will combine Logica's leadership in project management and strategic focus on repeatable solutions with CMG's exceptional customer management skills. Both companies share a common ambition, vision and commitment to future success. Together, they create a powerful platform for enhanced future growth."
This summary should be read in conjunction with the full text of the attached announcement.
A presentation to analysts regarding the Merger will be held today at 9.00 a.m. for 9.30 a.m. at the Merrill Lynch Financial Centre, 2 King Edward Street, London, EC1A 1HQ. There will be a live webcast of the presentation available from both companies' websites.
There will be a newswire conference call at 7.30 a.m. Please contact The Maitland Consultancy (020 7379 5151) or Will Cameron (020 7446 1786) for dial-in details. A press conference will be held at 11.45 a.m., also at Merrill Lynch.
For more information, visit: www.logica.com/LogicaCMG/choices.asp.
High resolution images are available for the media to view and download free of charge from www.vismedia.co.uk.
Enquiries:
LOGICA CMG
Will Cameron Tel: 020 7446 1786 Tony Richards Tel: 020 7592 4442
Richard Porter Tel: 020 7446 4616 Heleen Kamerman Tel: +31 20 6720 444
Merrill Lynch Tel: 020 7628 1000 Goldman Sachs Tel: 020 7774 1000
Bob Wigley Richard Campbell-Breeden
Tim Pratelli, Corporate Broking Huw Williams
Andrew Congleton
Close Brothers Tel: 020 7655 3100 ABN AMRO Tel: 020 7678 8000
Stephen Aulsebrook
Simon Willis Nigel Turner
Jitesh Gadhia
ING Barings Tel: 020 7767 1000 Hoare Govett Tel: 020 7678 8000
Michael Whealon
Xavier Moreels Bob Pringle
Charles Lytle
UBS Warburg Tel: 020 7567 8000 Citigate Dewe Rogerson Tel: 020 7638 9571
Tim Waddell Toby Mountford
Sebastian Hoyle
The Maitland Consultancy Tel: 020 7379 5151 Citigate First Financial Tel: +31 20 5754 010
Colin Browne Marise Blom
Angus Maitland Frits Hendrix
* The statement that the Merger is expected to be earnings enhancing for Logica and CMG should not be interpreted to mean that the earnings per share in the financial year following the Merger, or in any subsequent period, will necessarily be greater than those for the relevant preceding financial period.
** The expected operating cost savings have been calculated on the basis of the existing cost and operating structures of the companies and by reference to current prices and exchange rates and the current regulatory environment. These statements of estimated cost savings and one-off costs for achieving them relate to future actions and circumstances which, by their nature, involve risks, uncertainties and other factors. Because of this, the cost savings referred to may not be achieved, or those achieved could be materially different from those estimated. This statement should not be interpreted to mean that the earnings per share in the financial year following the Merger, or in any subsequent period, will necessarily be greater than those for the relevant preceding financial period.
Merrill Lynch is acting for Logica and no-one else in connection with the Merger and will not be responsible to anyone other than Logica for providing the protections afforded to clients of Merrill Lynch or for providing advice in relation to the Merger.
Close Brothers is acting for Logica and no-one else in connection with the Merger and will not be responsible to anyone other than Logica for providing the protections afforded to clients of Close Brothers or for providing advice in relation to the Merger.
ING Barings is acting for Logica and no-one else in connection with the Merger and will not be responsible to anyone other than Logica for providing the protections afforded to clients of ING Barings or for providing advice in relation to the Merger.
UBS Warburg is acting as joint broker for Logica and no-one else in connection with the Merger and will not be responsible to anyone other than Logica for providing the protections afforded to clients of UBS Warburg or for providing advice in relation to the Merger.
Goldman Sachs International is acting for CMG and no-one else in connection with the Merger and will not be responsible to any other person for providing the protections afforded to clients of Goldman Sachs International or for providing advice in relation to the Merger.
ABN AMRO is acting for CMG and no-one else in connection with the Merger and will not be responsible to any other person for providing the protections afforded to clients of ABN AMRO or for providing advice in relation to the Merger.
ABN AMRO Bank N.V. is acting for Logica as the listing agent in connection with the application to Euronext Amsterdam and as the share exchange agent in connection with the exchange of CMG Shares into LogicaCMG Shares and will not be responsible to anyone other than Logica for providing the protections afforded to clients of ABN AMRO Bank N.V. in relation to its role as listing and share exchange agent.
Hoare Govett is acting as broker for CMG and no-one else in connection with the Merger and will not be responsible to anyone other than CMG for providing the protections afforded to clients of Hoare Govett or for providing advice in relation to the Merger.
This announcement does not constitute an offer to sell or invitation to purchase any securities or the solicitation of any vote or approval in any jurisdiction.
The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restrictions.
The LogicaCMG Shares to be issued to CMG Shareholders under the Scheme have not been and will not be registered under the Securities Act, in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 3(a)(10) thereof. Logica Shareholders who are or will be affiliates of CMG or Logica prior to, or of LogicaCMG after, the Effective Date will be subject to certain US transfer restrictions relating to new LogicaCMG Shares received under the Scheme. Such transfer restrictions will be described more fully in the documentation relating to the Merger to be despatched to Shareholders of Logica and CMG subsequent to the dates hereof.
In addition, no steps have been, or will be taken to enable the LogicaCMG Shares to be offered in compliance with the applicable securities laws of Canada or Japan and no prospectus in relation to the LogicaCMG Shares has been, or will be, lodged with or registered by the Australian Securities and Investments Commission. Accordingly, the LogicaCMG Shares may not be offered, sold, transferred, resold, delivered or distributed, directly or indirectly, in or into or from Australia, Canada or Japan (except in transactions exempt from or not subject to the registration requirements of the relevant securities laws of Australia, Canada or Japan).
This announcement contains certain statements that are or may be forward looking. These statements typically contain words such as "intends", "expects", "anticipates", "estimates" and words of similar import. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward looking statements. These factors include, but are not limited to, factors identified elsewhere in this document as well as the following possibilities: future revenues are lower than expected; costs or difficulties relating to the integration of the businesses of Logica and CMG, or of other future acquisitions, are greater than expected; expected cost savings from the transaction or from other future acquisitions are not fully realised or realised within the expected time frame; competitive pressures in the industry increase; general economic conditions or conditions affecting the relevant industries, whether internationally or in the places Logica and CMG do business, are less favourable than expected; and/or conditions in the securities market are less favourable than expected.
The Panel wishes to draw the attention of other member firms of Euronext Amsterdam to certain UK dealing disclosure requirements during the offer period pertaining to the Merger. The offer period (in accordance with the City Code, which is published and administered by the Panel) commenced on 8 October 2002 when an announcement was made of a possible offer. Logica has equity securities traded on the London Stock Exchange and CMG has equity securities traded on the London Stock Exchange and Euronext Amsterdam.
The above disclosure requirements are set out in more detail in Rule 8 of the City Code. In particular, Rule 8 requires public disclosure of dealings during the offer period by persons who own or control, or who would as a result of any transaction own or control, one per cent. or more of any class of relevant securities of the offeror or offeree company. Relevant securities include Logica Shares, instruments convertible into Logica Shares, CMG Shares and instruments convertible into CMG Shares. This requirement will apply until the end of the offer period.
Disclosure should be made on an appropriate form by no later than 12 noon London time on the business day following the date of the dealing transaction. These disclosures should be sent to a Regulatory Information Service.
The Panel requests that member firms advise those of their clients who wish to deal in the relevant securities of Logica or CMG, whether in the Netherlands or in the UK, that they may be affected by these requirements. If there is any doubt as to their application, the Panel should be consulted (telephone number: +44 (0)20 7382 9026, fax number: +44 (0)20 7638 1554).