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

To: BM who wrote (184)	1/7/1998 8:01:00 AM
From: BM	Respond to of 1673

"BCE Nears Coveted Prize" - Ottawa Citizen Wednesday 7 January 1998 BCE nears coveted prize Canadian giant owns 50% of CGI Andrew McIntosh The Ottawa Citizen Five years after making an unsuccessful play for an Ottawa-based computer-systems integration and servicing company, Canadian giant BCE Inc. is close to getting what it has coveted for years. Following separate deals worth a total of $336 million that were unveiled on Monday, BCE owns about 50 per cent of CGI Inc., a fast-growing systems integrator and technology service provider based in Montreal. What is interesting about the transaction is that CGI was not BCE's first choice, and the circumstances under which BCE made the deal were not ideal. BCE announced a two-part transaction with CGI worth a total of $335.4 million. First, Bell handed its Bell Sygma unit, which manages the computer systems for Bell Canada and does systems-integration work for outside companies, to CGI in exchange for 8.6 million CGI shares worth $197.6 million. In a second, related deal, BCE also picked up six million shares of CGI owned by Teleglobe Inc. of Montreal for $22.98 per share, or $137.8 million. Teleglobe had received 10.5 million CGI shares after it sold its insurance computer-systems unit to CGI last September. The deals boost Bell's stake in CGI to 43 per cent from 23 per cent and includes an option for BCE to own 56 per cent of CGI within six years should it buy stock now owned by CGI's senior management group. The merged CGI and Bell Sygma will have a combined work force of 7,000 information-technology professionals across Canada, annual sales of about $1 billion and a backlog of orders worth $4.5 billion, the companies said. The Toronto Stock Exchange said yesterday it will quickly add CGI to its prestigious 300 index as a member of the technology and software subgroup of listed companies, news that helped boost CGI stock $4.70 to $28 each. BCE had tried to buy out SHL Systemhouse Ltd. five years ago. The deal collapsed after BCE refused to relinquish more than 25 per cent of the new company it proposed to create with SHL Systemhouse. SHL Systemhouse was later acquired by U.S. telecom giant MCI in 1995. But BCE did not give up the hunt for a system integrator and three years later decided to buy a 20-per-cent chunk of CGI, founded in 1976. Anthony Zicha, an analyst at brokerage Deacon Capital Corp., praised the BCE deal with CGI, saying Bell Sygma's operations will benefit tremendously from the strong management at CGI. Mr. Zicha expects CGI shares to hit $33 each in six months and possibly $40 by the end of 1998. "CGI has never disappointed, and they've got new momentum now as a result of this deal," he added. Another analyst said overlooked in the CGI-BCE deal is the previous sale by Charles Sirois' Teleglobe Inc. of its 10.5 million CGI shares to a syndicate of brokerage firms. "That sale basically said, 'Charles Sirois believes CGI is fully valued and he would rather not own it," the analyst said. The analyst said that portfolio managers at the Fidelity Mutual Fund Management Co., the world's largest fund company, are big admirers of Mr. Sirois and follow his actions and decisions very closely. When Sirois sold out of CGI, they became nervous. When the syndicate of brokerage firms failed to quickly sell the block of 10.5 million CGI shares, Fidelity managers became even more nervous. "They are momentum players, and they saw CGI stock suddenly losing momentum," the analyst said. That's why BCE, with its 23-per-cent stake in CGI, rushed to the table. It feared a sudden decline in the value of its CGI investment if Fidelity began cutting its 27-per-cent CGI stake held by three different funds, the analyst said. "One could say BCE rode in to save its own investment," he added. Mr. Zicha said the operations of CGI and Bell Sygma should merge nicely and easily and the company will be well-placed to profit from a booming market in computer-systems integration business during the next five years. At the same time, Mr. Zicha said, the deal will allow Bell Canada to focus its full attention on the telephone business as its markets for local service are thrown open to competition later this year.