Logica plans to buy its rival CMG for £512 million in stock in a merger that would create Europe's second-largest publicly traded IT services company and a leading provider of mobile messaging software, the two London companies have announced.
A combined Logica and CMG would create cost savings allowing the new company to compete more effectively with such rivals as EDS and Cap Gemini, said Martin Read, Logica group managing director and proposed group chief executive of the new company.
The merged company would become a global player in software for wireless messaging and payments, with particular strength in the government sector, Read said.
"Together we will be a major force in the public sector. Our combined strength will allow us to win a larger number of government contracts in that sector than we would have done individually. The merger gives us a bigger scale to take on bigger works," he said.
Last year, Logica and CMG had combined sales of £2.15 billion and together the companies would share 250 clients worldwide.
Read conceded that both companies had faced a difficult year financially and that integration would be a challenge, with about 1,400 jobs, or 6 per cent of the combined company, to be eliminated. The combined group will have just under 24,000 employees after the merger, with operations in 34 countries, Read said.
The companies are expecting to finalise the deal by the end of the year, pending standard shareholder and regulatory approval.