LogicaCMG's agreed deal to buy WM-data, a Scandinavian IT services firm, for £882m in cash and shares could be derailed if the shares come under further pressure and fall to 147p, a level at which Sweden's Wallenberg family and other investors could pull out.
The shares dropped 7.5 per cent to 159.5p on Monday when the deal was announced but recovered slightly to 160p yesterday. Many City analysts have criticised the acquisition as expensive and some have questioned its rationale.
Analysts at Citigroup said: "The rationale of the WM-data deal seems to be mainly based on acquiring scale. While scale is increasingly important in large international outsourcing deals, we have some doubts if WM-data is the right candidate due to its local focus."
Under the terms of the offer, LogicaCMG will pay 80 per cent of the consideration in shares, so if the stock price falls further, the value of the offer will drop. A clause dictates that if the value falls by 12 per cent, which would equate to a 15 per cent drop in the share price to 147p, irrevocable undertakings from WM-data's two largest shareholders to support the deal would fall away and they would be able to pull out. LogicaCMG would have to pay WM-data a £500,000 break fee.
Investor, the holding company of the wealthy Wallenberg family, and the WM-data founder Thord Wilkne, who jointly own 23.2 per cent of the share capital and 53.2 per cent of the voting rights, have backed the offer. Investor's chief executive Borje Ekholm is also the chairman of WM-data.
A spokesman for LogicaCMG said: "The company thinks it's very unlikely that this [share price fall] will happen. The shares have stabilised after the initial fall on Monday." He said it was not surprising the shares dropped then as the company announced it would issue up to 409 million shares to pay for the purchase, and because WM-data was not well known in London.
Insiders thought it would take a major event to trigger a big fall in the LogicaCMG share price, and added that would probably affect the whole IT services sector and make the offer look more attractive.Reuse content