Thursday, May 23, 2024

Merger Creates Consulting Monster

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American Management Systems (AMS) announced it has entered into a definitive merger agreement with CGI Group, the largest Canadian independent IT services firm in an all cash transaction valued at $858 million.

AMS also announced it will sell off its defense and intelligence business to Arlington, Va.-based defense contractor CACI Corp. for $415 million with closing to occur once all tender offer conditions are satisfied.

The combination of CGI and AMS creates a multibillion dollar IT, business process and professional services company with approximately 25,000 employees and major locations in the U.S., Canada, and Europe. The combined entity will have approximately $3 billion in annual revenue and contract backlog of approximately $10 billion.

“This merger is a bold step in accelerating the execution of our strategic imperatives outlined two years ago, particularly in achieving scale and migrating to managed services,” said AMS Chairman and CEO Alfred Mockett. “The combination of these businesses provides an excellent strategic fit, business model and cultural fit. AMS and CGI are complementary businesses — both companies focus on customers in the public sector and in the financial services and communications industries.”

Under terms of the agreements:

  • CGI will acquire, through a tender offer, all of the outstanding shares of AMS at $19.40 per share in cash. This represents a 26% premium to the 30-day trailing average.
  • Serge Godin, chairman and CEO of CGI will be chairman and CEO of the combined entity, which will be known in the U.S. as CGI-AMS.
  • CACI will purchase the assets of AMS’s Defense & Intelligence business for $415 million in cash.
  • The CGI transaction is conditioned, among other things, upon customary approvals. The companies anticipate the transaction will be completed in the second quarter.

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