CGI-Logica Merger Makes Founder Serge Godin a Billionaire
CGI Group Inc. (CJ5A) founder Serge Godin said the “stars were aligned” when he capitalized on a strong Canadian dollar and depressed European economy to buy Logica Plc for $2.6 billion last year. That constellation has spurred a surge in shares of CGI and made Godin a billionaire.
CGI, an information-services company based in Montreal, has jumped 53 percent this year on the Toronto Stock Exchange, lifting its market value to C$10.9 billion ($10.5 billion). Godin owns 31.9 million shares, according to the company, valued at more that $1 billion.
“The timing of the deal when European assets were depressed and Canadian dollar was strong has worked very well,” said Steven Li, an analyst at Raymond James Ltd. “They still have to execute but so far so good, especially given the most recent quarter.”
Li said that while it may be too soon to fully assess the impact of the deal on CGI’s business, CGI has begun to do the right things to improve Logica’s profitability, including walking away from contracts that were not lucrative.
Godin, 63, said the decision to buy Logica, its biggest acquisition ever, was spurred by a belief that even cash-strapped European companies would need to invest in technology and that the continent was not about to disappear despite the European sovereign debt crisis raging at the time.
“Whatever happens to the euro has no bearing on how we view Europe,” Godin said in an interview at the time. “Global companies are still going to do business there, governments are still going to function.”
CGI -- the initials stand for Conseiller en Gestion et Informatique, freely translated as Consulting to Government and Industry -- was established as a two-man information services company in Quebec City in 1976 when Godin was 26. The company has 69,000 employees across 40 countries and says it’s the fifth-largest IT company in the world.
Godin handed over the role of chief executive officer to Michael Roach in 2006 and remains CGI’s chairman. Together, they’ve spent more than $6 billion in the past decade on acquisitions to take on market leader International Business Machines Corp. (IBM)
CGI on July 31 reported sales and profit last quarter that beat analysts’ estimates, as the Logica acquisition lifted the company’s margins. The stock soared 9.8 percent on the news, the most since April. The surge also consolidates CGI’s status as Canada’s biggest technology company, eclipsing better-known smartphone maker BlackBerry (BBRY) Ltd., which has fallen on hard times and has a market valued less than half of CGI.
The company has also won a spate of recent contracts, pushing up its order backlog to C$18.7 billion, a 38 percent increase from a year earlier. The company yesterday said it secured ‘prime position’ on a $1 billion contract to provide cloud computing services to the U.S. Department of the Interior.
CGI was little changed at C$34.99 at 9:31 a.m. in Toronto.
Lorne Gorber, a spokesman for CGI, declined to comment on Godin’s net worth.
“All CGI professionals have the opportunity to become shareholders and most take advantage of that,” he said. “It’s a key part of our strategy.”
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