Montreal, Canada-based CGI tabled an offer of CAD 4.25 per share on December 6, which valued the entire transaction at $265m or a premium of 1.67 times the company’s market capitalization prior to the deal of $158.6m. CGI planned to pay Cognicase, which is also based in Montreal, in equal amounts of cash and shares.
Ronald Brisebois, president and CEO of Cognicase, said yesterday that there was a reasonable prospect that his company would receive a higher bid, and criticized the timing of CGI’s approach. I am very satisfied by the strong interest shown by several potential buyers over the past week. Considering the rapidly approaching holiday season, the timing of this unsolicited bid is inappropriate for shareholders, who were pressed for time by the original tight deadline, he said.
Brisebois added that Cognicase has initiated a shareholder rights plan, which prevents anyone from acquiring more than 20% of the outstanding common shares while the board is examining all the bids. Cognicase said its decision to turn down the CGI bid was based in part on advice from investment group BMO Nesbitt Burns.
The National Bank of Canada, which owns a 15% stake in Cognicase and is also its largest client, had originally agreed to accept the CGI bid, and said that if the bid was successful, Cognicase’s existing outsourcing project with the National Bank would be extended for a further 10 years. The two companies signed a 10-year, CAD 1.2bn ($773m) deal in June 2000, which saw Cognicase acquire the bank’s IT and eCommerce subsidiary.
Cognicase has become vulnerable to a takeover after struggling with the after-effects of an acquisition spree, which saw it buy nine companies in the first six months of 2002. In its fourth fiscal quarter ending September 30, 2002 it took a CAD 131.4m ($84.6m) charge to write off goodwill against its acquisitions. In the full-year, Cognicase made a loss of CAD 478.5m ($308m) on revenue that grew 27% to CAD 513m ($330m).
Source: Computerwire
