LogicaCMG in £882m bid for WM-data

LogicaCMG is to acquire Swedish IT services company WM-data in an £882m deal that will make the combined entity one of the top 20 global services companies based on revenue.

The offer is around 25 per cent above the Swedish company's average share price over the last three months and the WM-data board has unanimously recommended shareholders to accept the deal.

Annualised cost savings from the combined company are expected to be £15m by the end of 2008 at a cost of £22m over the next two years. The new company will also have almost 40,000 staff in 41 countries with joint revenues of more than £3bn in the last financial year.

WM-data's small near-shore operations in Estonia and Poland will also complement LogicaCMG's operations in India and central Europe, the companies said.

Crister Stjernfelt, currently president and CEO of WM-data, will become an executive member of the board of LogicaCMG and will join LogicaCMG's executive committee with responsibility for the Nordic region on completion of the deal.

Dr Martin Read, CEO of LogicaCMG, said in a statement: "Increasingly, our customers want to do business with a smaller number of larger suppliers who can provide them with a broader range of offerings and support them internationally."

Robert Morgan, director at outsourcing advisors Morgan Chambers, said the deal appears a good fit but that there will be concerns at the many fronts LogicaCMG's management team are currently fighting on, such as the Unilog integration in France and the struggle that global service providers have traditionally had in trying to capitalise on investment in the Nordics.

Phil Codling, senior analyst at Ovum, said in a briefing note: "If LogicaCMG can lower WM-data's delivery costs (using its global-delivery mechanism) and make its new subsidiary's operations more attractive to Nordic multinational clients by creating a stronger services portfolio and delivering greater pan-European clout, then it stands a chance of raising WM-data's organic revenue growth."