Canada’s CGI proposes acquisition of AMS

The assets and employees of Fairfax, Va.-based American Management Systems will be divided between two companies in a three-way acquisition led by Canada’s CGI Corporation worth approximately $1.3 billion cdn, or US $985 million.

Canada’s largest independent IT services firm, CGI Corporation, and AMS, an IT services company serving government, financial services and communications companies, announced a definitive agreement yesterday whereby CGI will acquire the majority of AMS for approximately $858 million in cash, or $19.40 per share. The remainder of AMS’ assets, primarily its Department of Defense and Intelligence business, will be acquired by fellow Virginian IT company, CACI, for $415 million in cash once all tender offer conditions are satisfied.

Serge Godin will remain chairman and CEO of the combined company, which will be known in the U.S. as CGI-AMS. "This is another very significant step toward our goal of becoming a world class IT and [business process outsourcing] leader," Godin said.

Approximately 4800 of AMS’ 6500 employees will join CGI upon close of the merger, bringing their headcount to about 25,000. The remainder of the employees will go to CACI. "AMS employees have developed a strong professional reputation in the marketplace and their ultimate contribution to CGI will be very, very significant," Godin said.

Alfred Mockett, chairman and CEO of AMS for the last two years, said that following the close of the transaction and a transition period yet to be determined, he will step aside.

"I came to AMS to restructure, rebuild and reposition AMS to capitalize on the upturn in our industry’s fortunes as they materialized," Mockett said. "With that stage complete, my attention remained locked on the five strategic imperatives to achieve scale by organic growth and acquisition."

Those five imperatives were to refresh the product portfolio, opening up the closed architecture and proprietary solutions, partner in every dimension of the business, build new revenue streams from managed service and build shareholder value. "We made solid progress against all these imperatives by going it alone, save the last," Mockett said. "We are now presented with an opportunity to join forces to accelerate that strategy."

He added that although the merger is to be effected by way of a cash tender offer, the spirit of the transaction and its operation and implementation will be that of a merger, picking the best of both companies.

The combined entity will have approximately $3 billion in annual revenue and a contract backlog of approximately $10 billion.

AMS marks CACI’s 27th and largest acquisition to date. "It rapidly expands our presence in the Department of Defense, Intelligence and Homeland Security markets and facilitates our goal of becoming a $2 billion per year enterprise by the end of fiscal year 2008," said Jack London, chairman, president and CEO of CACI.