J-R. To your question in a), you are right. CGI will issue its own stock.
What I am saying is that Bell has an anti-dilution clause with CGI. Each time CGI issues new shares as payment on an acquisition other than Bell related, Bell would normally be diluted. Don't forget, when they issue shares they issue millions of them. That means that Bell could drop from 43% to let say 36%.
Since Bell currently owns 43% with the options bringing them to 56% (+13%) , if they get diluted to less than 37, they will not control no more as previously planned.
As for your question in b), Bell purposely asked for an anti-dilution clause. Usually it is there so that the shareholder can maintain a certain amount of influence with the idea of later getting control! But don't just rely on my explanation. Look at the previous acquisition prior to the Bell Sygma deal.
When the bought CDSL and ISI (from Teleglobe), Bell invested some more to maintain it level of equity. Here is a header from Canadian Corporate News:
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NEWS RELEASE TRANSMITTED BY CANADIAN CORPORATE NEWS
FOR: CGI GROUP INC.
TSE, ME SYMBOL: GIB.A
OCTOBER 23, 1997
CGI and Teleglobe Complete Insurance Systems Group
Transaction and Bell Canada Purchases $43.7 Million of
First Preferred Shares, Series 1 of CGI to Maintain its
Level of Equity Interest
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They are using paper to create value !!! Isn't that great ? So imagine this: when they made a bid for Bell Sygma, both Sygma and CGI were at a $500M annual rev. rate. If they acquire After this deal is finalized, they could easily acquire companies doing up to $1 billion annual rev. It's possible. Unlikely but possible !
Does this make sense to you? |
