Canada’s CGI Scoops Up U.S.-based IT Services Provider

CGI Group Inc., Canada’s biggest independent computer services firm, is making a long-expected acquisition in the United States.

Montreal-based CGI plans to acquire Stanley Inc., a leading IT provider to U.S. defence, intelligence and federal civilian government agencies, for $37.50 US a share or a total of $1.07 billion Cdn ($903 million US).

The price represents a premium of 23.3 per cent over Stanley’s 30-day average share price in New York and 38.3 per cent over the 60-day average.

“The acquisition will raise the U.S. proportion of CGI’s revenue to 50 per cent from 37 per cent while quadrupling the size of its U.S. federal government business,” wrote Jason Kupferberg, UBS Investment Research analyst.

“But while the big deal that we’ve been waiting for is attractive, we believe CGI’s bigger challenge is to raise brand awareness and competitive traction in the U.S. commercial market.”

CGI already has a large IT and outsourcing business in the U.S., mainly in the health-care, municipal and other government services sectors. It will pay for the friendly Stanley deal with cash and bank borrowings. At last report CGI had cash and unused bank lines of more than $1.5 billion. Both companies’ boards have approved the deal.

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