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Gold/Mining/Energy : CGI Group (GIB.A) - -- Ignore unavailable to you. Want to Upgrade?

To: Gary H who wrote (168)	1/6/1998 8:45:00 AM
From: BM	Respond to of 1673

Globe & Mail on BCE-CGI deal BCE in $335.4-million deal with CGI Sale of data unit deepens firms' alliance Tuesday, January 6, 1998 By Patrick Brethour Technology Reporter BCE Inc. is selling its Bell Sygma unit to CGI Group Inc. as part of a $335.4-million deal that likely will see BCE take a majority stake in the Montreal technology services company. BCE will receive 8.6 million shares in CGI, valued at $197.6-million, in exchange for its Bell Sygma unit, which manages data processing and other computer systems for Bell Canada and external customers. The deal, which deepens a two-year-old alliance between the two firms, includes a separate share purchase by BCE and immediately boosts the Montreal telecommunications conglomerate's stake in CGI to 43 per cent from 23 per cent. BCE also receives an extra seat on the board of directors, for a total of three out of 13 spots. BCE's ownership position could rise as high as 56 per cent over the next eight years if it exercises its option to buy all the shares of the three founding partners, which includes chairman and chief executive officer Serge Godin. In the meantime, Bell Sygma will become part of CGI, creating a company with annual revenue of $1-billion, almost double CGI's current annualized sales of $550-million. The combined company will have a 10-year contract to manage Bell Canada's computer systems development and maintenance. Jean Monty, BCE's president and chief operating officer, said the ability to obtain a majority stake is one of the most important parts of the transaction for his company. "A clean path to control is a critical element to this deal. It's pretty certain we'll go to 56 per cent," said Mr. Monty, stressing that BCE has no intention of changing CGI's management or structure, even if it does gain majority ownership. Negotiations began in November, but an intensive session started Friday and lasted until 2 a.m. yesterday. Five years ago, talks aimed at a similar arrangement with Ottawa-based SHL Systemhouse Inc., a CGI rival, unravelled when BCE proved unwilling to cede more than 25 per cent of the proposed joint company. The deal with CGI is to take place in two stages. First, BCE will spend $137.8-million to buy six million CGI shares held by Teleglobe Inc. Montreal-based Teleglobe, an international long distance telephone company, received 10.5 million CGI shares last August when CGI bought its insurance systems unit. The sale to BCE at $22.98 a share, which is expected to close tomorrow, supplants Teleglobe's earlier move to sell its holdings to investment dealers for $24 a share. The dealers are to issue an amended prospectus for the remaining 4.5 million shares. The deal's second part, the CGI-Bell Sygma merger, is slated to be completed by June 30. Once finalized, it will be the largest acquisition in CGI's history. Mr. Godin said the addition of Bell Sygma will allow CGI to bid for larger contracts. The impact will be greatest internationally, accounting for 12 per cent of annual revenue at the combined company, up from just 5 per cent currently. Mr. Godin said the acquisition would help his company win contracts within the Stentor consortium of telecommunications companies, of which BCE is the largest member. But he acknowledged that the closer association with BCE could deter its direct rivals from selecting CGI bids. "That could be more sensitive." For BCE, the enlarged stake in CGI means a greater share of profit from the company's burgeoning bottom line, Mr. Monty said. On a strategic level, he said, the deal allows BCE to tighten ties with a business it needs to complement its own telecommunications services, but that its larger management structure is ill-suited to serve.

To: Gary H who wrote (168)	1/6/1998 9:07:00 AM
From: BM	Read Replies (1) \| Respond to of 1673

>> Enlighten me. With pleasure Gary. >> Somewhere along the way I was left with impresion that a lot of the older coding is in Cobol and that cobal programs from back in that era are somewhat scarse and they would be looking at premium wages for such people. How true is this if at all? Absolutely true. Some of the work can be done using automated tools however. >> It was also said, that getting down to the line premium programers could name there own price. If true, how would Y2K CO.s handle this when it comes? Those that are getting $45-60 now would be looking for $100-$120?hr. The prices are increasing and retaining staff will be a key issue for all Y2K companies. I imagine CGI will be affected to some extent but they will probably do much better than most other firms, given their track record of having one of the highest retention rates in the industry. Also, having their conversion centre in high unemployment areas (Saguenay, New Brunswick) makes raiding by other companies more of a challenge. As mentioned previously, with current premiums on Y2K work (CGI will have far more than it wants) I don't believe that CGI will be going around looking for more Y2K work unless that work results in more long-term outsourcing contracts such as the many new ones they won this year with the likes of Westburne, Spar, Teleglobe and now BCE.