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? As of Aug 21, we are resuming coverage of CGI with a SO rating and increasing our PT from $25.50 to $30.00 (based on 8x EBITDA) after the closure of the $2.7 bln Logica acquisition. The acquisition of the European based IT services firm effectively doubles CGI's size to $10.4 bln. in rev.
? Logica dramatically expands CGI's European presence (from 5% to 58% of rev.) and diversifies the revenue base (gains scale in manufacturing, telecom, energy and utilities). Management is targeting $200 mln. in cost synergies and we believe revenue synergies also exist.
? While we do not expect any imminent European economic turnaround, we believe that CGI acquired Logica for a reasonable valuation (6.6x EBITDA), at a point where Logica's operations were near the trough, with Logica expected to see the benefits of a recent restructuring in H2/12 and beyond.
? Overall, we view the Logica transaction positively and believe that CGI is now well positioned for an eventual European recovery. We have updated our financial forecast to reflect Logica and other items that occurred while we were on restriction, including FQ3 results.
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