March 23, 2023

DealBook: CGI of Canada to Buy Logica for $2.6 Billion

The Web site for Logica, the British information technology company.Chris Ratcliffe/Bloomberg NewsThe Web site for Logica, the British information technology company.

LONDON — The Canadian computer services company CGI Group on Thursday agreed to buy the British information technology company Logica for £1.7 billion, or $2.6 billion, as CGI looked to continue its expansion into overseas markets.

Under the terms of the deal, CGI, based in Montreal, will offer Logica shareholders 105 pence, or $1.63, for each of their shares. The offer is 60 percent above Logica’s closing share price on Wednesday.

The acquisition, which is supported by Logica’s board and other major shareholders, would give CGI, whose operations have focused on North America, access to a number of European markets.

It is the latest in a flurry of deals for British technology companies. Last year, Hewlett-Packard acquired the software maker Autonomy for $11.7 billion, while the private equity firm Vista Equity Partners is currently seeking to buy Misys, another British software company, for $2 billion.

CGI is also taking advantage of the effect of the European debt crisis, which has caused the values of many of the Continent’s companies to fall because of a reduction in consumer spending and an economic slowdown.

Michael Roach, left, CGI's chief executive, and Serge Godin, the executive chairman, in 2006.Ian Barrett/The Canadian Press, via Associated PressMichael Roach, left, CGI’s chief executive, and Serge Godin, the executive chairman, in 2006.

Last year, Logica announced a restructuring plan that included laying off around 1,300 workers. The British company has also issued a number of profit warnings, and its share price has fallen more than 50 percent in the last 12 months.

In response to CGI’s takeover announcement, Logica’s share price rose 66 percent, to 109.5 pence, in late afternoon trading in London, higher than CGI’s offer price.

Despite the problems facing Logica, CGI said the deal would help expand CGI’s operations across Europe.

“This announcement is consistent with our profitable growth strategy and with our belief that global consolidation of our industry is both necessary and inevitable,” CGI’s chief executive, Michael Roach, said in a statement. “We believe Logica is the right acquisition, at the right price and at the right time.”

CGI, which employs 31,000 worldwide and recorded revenue of $4.3 billion last year, said the acquisition would lead to around $200 million in annual cost savings, and would be financed through a combination of new debt financing and existing credit facilities.

The acquisition is expected to close by September.

Goldman Sachs advised CGI on the deal, while Logica was advised by Rothschild, Bank of America Merrill Lynch and Deutsche Bank.

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DealBook: Universal Music Group Set to Acquire EMI Unit

The Beatles greet visitors at EMI Music's headquarters in London.Chris Ratcliffe/Bloomberg NewsThe Beatles greet visitors at EMI Music’s headquarters in London.

10:16 a.m. | Updated

Vivendi, the French media and telecommunications company, has agreed to acquire the recorded music division of the EMI Group for 1.2 billion pounds, or about $1.9 billion.

The agreement means that the EMI record label, whose artists include the Beatles and Coldplay, will be under the same corporate umbrella as the Universal Music Group, the world’s largest music company.

Vivendi is acquiring the EMI music division from Citigroup, which seized EMI from Terra Firma Capital Partners, a private equity firm controlled by the British financier Guy Hands, after Terra Firma failed to pay back loans to the bank.

In a statement on Friday, Jean-Bernard Lévy, the chief executive of Vivendi, said: “We are very proud to welcome EMI into the Vivendi family. We all respect the labels within EMI as well as the artists and employees who contribute to its success. They will find
within our group a safe, long-term home, headquartered in Europe.”

Vivendi said it would finance the acquisition from its existing credit lines. At the same time, Vivendi plans to sell 500 million euros worth of non-core Universal Music assets.

The agreement with Citigroup does not include the music publishing business of EMI, which has drawn interest from Sony/ATV Music Publishing and BMG Music Publishing, a joint venture of Bertelsmann and the private equity firm Kohlberg Kravis Roberts.

A person briefed on the Vivendi deal, who spoke on condition of anonymity, said Sony/ATV was poised to reach an agreement for the publishing business, though a deal would not be announced immediately.

“It looks like Sony/ATV, barring a last minute counterattack from Bertelsmann/KKR,’’ this person said.

The deal with Vivendi ends a drawn-out biding process. The EMI recording division had drawn interest from a variety of bidders, including Len Blavatnik, the owner of the Warner Music Group.

Under the agreement with Vivendi, Citigroup will maintain EMI’s pension liability, which had been one of the major points of contention in the talks with any bidder.

Allen Company and SJ Berwin advised Vivendi. Clifford Chance, Shearman Sterlingand Freshfields Bruckhaus Deringer
acted as legal advisers to Citi and EMI.

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DealBook: Undaunted by Past Setbacks, Hands Resumes EMI Fight

Guy Hands, chief of Terra Firma.Qilai Shen/Bloomberg NewsGuy Hands, chief of Terra Firma.

8:08 p.m. | Updated

Guy Hands is back.

Months after Citigroup seized EMI Group from him, Mr. Hands, the charismatic British financier, went to court on Tuesday in an effort to win back control of the music company.

Mr. Hands has asked the High Court in London for access to documents that show the valuation methodology used by the accounting firm PricewaterhouseCoopers to justify Citigroup’s seizure of EMI in February.

If a judge granted Mr. Hands the right to see those documents, he could use them to challenge Citigroup’s taking control of the music company. Mr. Hands believes that EMI, which was making interest payments, was not insolvent when Citigroup took it over.

“We believe there is no basis for any claim against Citi,” said Danielle Romero-Apsilos, a bank spokeswoman.

This latest legal dust-up comes as Citigroup has put EMI up for sale. A handful of private equity firms and music labels have expressed an interest in the company.

Mr. Hands’s action could scare off any potential buyers. But Citigroup plans to indemnify any of the bidders from legal claims by Mr. Hands, according to two people briefed on the deal who were not authorized to speak publicly.

Tuesday’s move rekindles what has been a bitter dispute between Mr. Hands and his former bankers over EMI, the record label whose stable of artists include Snoop Dogg and Katy Perry.

The debut album by Queen, a band signed to the EMI music label.Chris Ratcliffe/BloombergThe EMI music label is being shopped by Citigroup.

Last year, in Federal District Court in Manhattan, a jury cleared Citigroup of any wrongdoing in its role in the sale of EMI. Mr. Hands had sought an $8 billion recovery, plus punitive damages, accusing the bank of defrauding him during the auction of EMI.

He directed his charges at David Wormsley, a top British banker at Citigroup and Mr. Hands’s once-trusted adviser. He said that Mr. Wormsley artificially drove up EMI’s price by lying to him that there was another bidder for the company.

He said that the misrepresentation caused him to pay $6.8 billion for the company.

Mr. Hands is appealing the verdict.

The debt-laden purchase of EMI by Mr. Hands’s firm, Terra Firma Capital Partners, is widely considered one of the buyout boom’s worst deals. It was struck in August 2007 just as the credit markets were freezing up. At the same time, the record business began to tank. Mr. Hands bet about 30 percent of Terra Firma’s most recent fund on EMI. It lost about $2.5 billion on the deal.

Despite those woes, Mr. Hands continues to press on.

Terra Firma plans to raise a new multibillion-dollar fund next year. Aside from the EMI debacle, the rest of Terra Firma’s most recent fund has performed well. Though it is still suffering paper losses, Mr. Hands said that he hopes to return all of the capital invested to his investors.

Citigroup, meanwhile, continues to carry out its auction of EMI. Potential bidders that have expressed an interest in the company include Warner Music and the billionaire investor Ronald O. Perelman.

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