MONTREAL – BCE will soon have over $2 billion dollars in the bank.
Bell Canada Enterprises announced today that it is selling its stake in IT services firm CGI for $859 billion. CGI is buying 100 million of its shares from BCE. Added to the $1.3 billion it’s getting from the sale of majority control of Bell Globemedia, announced earlier this month and the now has a war chest of $2.1 billion.
And, following the expiration of a 120-day standstill period from the closing date, BCE intends to dispose of its remaining 28.3 million class A shares, having a current market value of approximately $242 million in an orderly fashion, with a view to maximizing value for BCE shareholders.
“The disposition of BCE’s stake in CGI is one further result of the company’s continuing review of its asset base. The review determined that it was no longer strategically essential for BCE to hold an investment in CGI – given that Bell Canada’s focus is on providing network centric managed services and applications. BCE and CGI agreed that their ongoing relationship – and the significant mutual benefit it represents — could be secured through commercial agreements,” says today’s press release.
So, BCE and CGI have extended their outsourcing agreements, that will see CGI remain Bell Canada’s preferred IS/IT supplier until June 2016. CGI’s agreement outsourcing its Canadian communications network management requirements to Bell will be similarly extended. As well, the commercial alliance between CGI and Bell Canada’s Enterprise Group will be extended until 2016.
"We believe that investing in CGI is the best use of our financial resources. Like any acquisition we make, it will clearly be accretive to our shareholders" said Serge Godin, chairman and CEO of CGI. "Bell is one of CGI’s most valued customers and CGI is one of Bell Canada’s leading clients, together forming a key strategic partnership to deliver integrated solutions to our Canadian clients. The extension of our outsourcing agreements reinforces our relationship and provides CGI with an important source of recurring revenues as well as $1.1 billion of additional backlog."
"Given the decision to exit our stake in CGI, the sale of the majority of our shares directly to CGI was the most efficient and economical means of realizing value from our investment," said Michael Sabia, president and CEO of BCE, referring to the fact that the transaction is at market price rather than at a discount which is typical when a large block of shares is sold. "This is the second recent move we have taken to reshape our asset base. Furthermore, with the commercial agreement, we will be able to deliver significant overall IS/IT savings to further the company’s Galileo cost reduction objectives."
Neither Sabia nor the release said what Bell plans to do with the money.
The transaction is expected to close by January 12, 2006.
