On the morning of September 16, 2005, Unilog asked for its shares to be suspended from trading on the Paris Bourse after shares in the company soared 8%, amid speculation of takeover bids from LogicaCMG, Tata Consultancy Services, and Capgemini.
Immediately afterwards, LogicaCMG released a statement in which it said it was in advance discussions which may or may not lead to an offer being made for Unilog for E73 ($89) a share. It also said that a further announcement would be made in the next few days.
In August, London-based LogicaCMG revealed that it was considering acquisitions in France and Germany to gain the scale needed to compete against larger rivals. Unilog will help it beef up its presence in both markets. In the six months to the end of June 2005, its French division reported an operating loss of GBP3.7m ($6.7m) on revenue that grew 13% to GBP57.6m ($104m), and its German operation made an operating loss of GBP5.8m ($10.5m) on revenue that fell 14% to GBP39.8m ($72m), caused by recent restructuring and a poor performance by its business in certain vertical markets.
Unilog is in sound financial health, which together with acquisition rumors has increased its share price by over 50% in the last 12 months. For the first half of 2005, its sales increased by 20% to E373.8m ($456.7m), with a 59% increase in its German operations to E56.9m ($69.5m) following the acquisition of Avinci last year. Sales in France increased 16% to E301.7m ($368.6m) and make up 81% of overall revenue.
It is not yet clear how LogicaCMG plans to finance the proposed purchase. A share swap would involve very heavy dilution, as LogicaCMG’s market cap is only 1.3 times the cost of the purchase. At the beginning of the year it only had GBP104.8m ($189.4m) in cash on its balance sheet and at the end of June it had increased its net debt to GBP303m ($547.5bn), so it could be forced to sell off parts of its business in order to pay for the acquisition. The company’s wireless networks division, which includes its text messaging software business, would be the most likely candidate for divestment.
The deal is not yet finalized, and prior to the suspension, Unilog’s shares were trading above the price LogicaCMG had stated it was prepared to pay. It is not yet clear whether other suitors are preparing to enter into a price war for Unilog. At the time of writing, neither Capgemini nor Tata had returned calls to establish whether or not they were prepared to make a higher offer.
