The National Bank of Canada and Societe Generale (Canada) have each contributed CAD 50m ($37.3m) to the Montreal-based company’s credit facility, bringing its available funds to CAD 540m ($503m).

Being as vague as possible, CGI has stated that the fund is for the financing of acquisitions and outsourcing contracts, for its operating activity needs as well as for its cash management purposes.

In truth, the money could be used for any one of these purposes. The most tantalizing motive is to push through its bid for Canadian IT services company, XWave Solutions, which was put up for sale in January by its parent, Canadian networking technology company Alient Inc.

However, CGI has faced tough competition from rival bidder, Los Angeles, California-based Platinum Equity – at least according to the Canadian press, which claims Platinum is the preferred bidder for the CAD 399m ($259.4m) XWave because it can pay for the company partly in cash rather than just stock.

The acquisition would make sense because Xwave is the outsourced IT supplier to Bell Canada Enterprises, which holds a significant stake in the company, as well as a 29% stake in CGI.

One other use for the cash is to fund the company’s bid for an IT outsourcing contract with Canadian aerospace company, Bombardier Aerospace. Rumors from the media and analysts claim that CGI is competing with IBM for the contract that will outsource 250 Bombardier employees to the winner.

However, CGI spokesperson, Eileen Murphy, maintains that the rumors surrounding XWave and Bombardier are just that: rumors. She told ComputerWire that the credit extension will be used to fund a number of contracts and possible acquisitions that the company may be involved in over this year.

Acquisition is certainly a core strategy at CGI, which has bought 57 companies in the past 17 years. Over 2002, the company increased its number of employees by 10,000 to 30,000 in total through it acquisitions, which included Canadian software and services rival Cognicase Inc, management consultancy Cornerstone, insurance underwriting firm INSpire and business process outsourcing firm UAB.

Whether or not the XWave and Bombardier deals are rumors, they certainly have not hurt CGI. The company’s share price has grown by 39% since January, closing at $6.05 on Friday 13, 2003. Taking out an extra CAD 100m ($74.7m) in credit is only going to fuel that further.

Source: Computerwire