- Agreement in principle to merge
Bell Sygma operations into CGI in exchange for 8.6 million CGI treasury shares - BCE purchases 6 million
outstanding CGI shares
The CGI Group, BCE Inc. and Bell Canada
today announced the purchase by BCE and Bell Canada
of additional shares of CGI and an agreement in principle to further strengthen
existing business relationships between the companies.
As part of the agreement in
principle, Bell Canada's existing systems
development operations (Bell Sygma Telecom Solutions and Bell Sygma
International) will be merged with CGI, in exchange for CGI shares. These
operations will become part of a wholly owned, separately managed subsidiary of
CGI. This new subsidiary will allow CGI to play a major role serving Canadian
markets and international clients in the telecommunications industry. This is
consistent with CGI's objective of establishing a strong presence in each of
its targeted business segments, including the telecommunications industry.
Agreement in principle to merge
Bell Sygma Telecom Solutions and Bell Sygma International
BCE, Bell
Canada
and CGI announced an agreement in principle to merge Bell Sygma Telecom
Solutions and Bell Sygma International operations into CGI in exchange for 8.6
million Series 6 preferred shares of CGI at $22.98 per share, convertible one
for one into Class A subordinate voting shares.
This agreement includes a
ten-year contract according to which CGI will manage Bell
Canada's
information services and information technology operations related to systems
development and systems maintenance.
In addition, Bell Sygma
International's operations will also be merged into those of CGI, potentially
representing $100 million in incremental annual revenue. As a result of these
mergers, more than 3,000 Bell Sygma employees will join CGI and the company's
order book will grow by approximately $3 billion over ten years.
As part of the transaction, Bell Canada
and CGI have also agreed to extend their strategic alliance to a ten-year
period. This alliance provides CGI with significant competitive benefits and allows
the company to bid on a greater number of large scale outsourcing and systems
integration contracts.
Under the terms of the agreement
in principle, the majority shareholders of CGI have the option of exchanging
(through a "put option") 20% of their holdings in Class B multiple
voting shares of CGI for shares of BCE over a four-year period, an additional
30% in the fifth year, and the remainder during the sixth year. After the sixth
anniversary, and for a period of two years after that, BCE has the option to
cause the exchange ("call option") of all Class A subordinate voting
shares and Class B multiple voting shares held by the majority shareholders
into shares of BCE. On the sixth anniversary, the multiple voting shares will
become single voting shares. CGI's management remains unchanged and will retain
responsibility for all operations.
This transaction is subject to
due diligence, completion of definitive agreements, regulatory and other
required approvals, and is expected to close by June 30, 1998.
Additional investment by BCE
BCE has agreed to purchase 6
million Class A subordinate voting shares of CGI at a price of $22.98 per share
from Teleglobe Investment Corp. As a consequence, the previously announced
secondary distribution by Teleglobe Inc. and Teleglobe Investment Corp. will be
reduced to 4,530,400 Class A subordinate shares and an amended prospectus will
be filed shortly with the Quebec
and Ontario Securities Commissions.
"We are very pleased with
these strategic developments, which are in line with our strategic plan
objectives that identified the telecom market as a prime target area,"
said Serge Godin, CGI's Chairman and CEO. "This transaction provides CGI
with the expertise, critical mass and resources to become a world-class player
on the international scene."
Following the two transactions, Bell Canada's
equity interest in CGI is at 43%. Bell Canada's voting
interest stands at 17.9%, compared with a combined voting interest of 66% for
all holders of Class B shares. Bell Canada will
hold three seats on the Board of CGI, up from two previously. Bell Canada board
representatives will be: Jean Monty, President of BCE; John Macdonald, Chief
Operating Officer, Bell Canada and Louis Tanguay, President and COO of Bell
Canada International.
CGI is the largest Canadian-owned
independent information technology consulting firm. With this latest
transaction, CGI will have more than 7,000 professionals and a revenue-run rate
of approximately $1 billion. The company's backlog will total $4.5 billion. It
provides end-to-end IT services and business solutions to some 2,000 clients
throughout North America and internationally.
CGI's shares are listed on the Toronto and Montreal stock exchanges
under the GIB.A symbol.
For more information:
Paule Doré
Executive Vice-President,
Corporate Affairs
CGI
(514) 841-3200
