The Montreal-based buyer is offering 105 pence per Logica share, a near-60% premium to the target's 65.70 pence closing share price Wednesday, or about £1.7 billion in total. CGI would also assume Logica debt, which at year's end stood at £321.6 million. The companies put an enterprise value on the deal of 6.6 times Logica's Ebitda in the 12 months ended Dec. 31.

CGI is swooping in after Logica's corporate and government clients curtailed IT investment, leading Logica to issue a profit warning at the end of last year and cut 1,300 jobs. Logica shares in London immediately rose above the CGI offer and were trading up 65%, at 108.4 pence, by early afternoon on hopes of competing bids.

Victor Bareño, an analyst at SNS Securities NV in Amsterdam, noted that France's Capgemini SA and Infosys Ltd. of Bangalore, India, had previously been rumored to be interested in Logica. However, he said a counterbid "is not straightforward in view of the substantial premium offered by CGI and the fact that Capgemini has its focus on acquisitions outside Europe."

CGI president and chief executive Michael Roach said the purchase of Logica will add critical mass and long-term client relationships, noting that consolidation in the IT services industry is both "necessary and inevitable."

Logica chairman David Tyler said the company's directors "consider there is a strong industrial logic for the proposed combination with CGI."

"Given the very limited geographic overlap and CGI's strong reputation for successful integration, we believe this transaction will offer great opportunities for Logica's people," he added.

Bareño noted that the deal makes strategic sense, given that Logica is almost fully focused on Europe, while CGI -- smaller in revenue terms but financially stronger -- gets 94% of its revenue from the American market and only 6% from Europe.

CGI, which provides information technology and business-process services to about 31,000 clients in Canada, the United States, Europe and the Asia-Pacific, posted about C$4.3 billion ($4.2 billion) in 2011 annualized revenue, with an order backlog of about C$13.1 billion. Based on CGI's Wednesday close, it has a market value of just more than C$5.43 billion.

Logica, which provides business consulting, systems integration and outsourcing to European public-sector agencies and businesses, reported revenue of £3.9 billion in 2011 and adjusted operating profit of £114 million.

CGI expects the acquisition to immediately boost adjusted earnings per share by 25% to 30%, excluding acquisition- and integration-related costs, and before synergies. It expects synergies of £125 million by the end of the third year and anticipates one-off integration costs of £165 million over three years.

CGI said it will fund the purchase by issuing subscription receipts that can be exchanged for new shares in CGI to Caisse de Dépôt et Placement du Québec and with debt funding from lenders including Canadian Imperial Bank of Commerce, National Bank of Canada and the Toronto-Dominion Bank.

CGI has received irrevocable undertakings from Logica's directors, as well as Schroders Investment Management Ltd. and Artemis Investment Management Ltd., to buy their shares in a court-sanctioned scheme of arrangement. The agreements concern just more than 18% of the stock. CGI is taking advice from Gregg Lemkau, Nick Harper and Nicholas van den Arend at Goldman, Sachs & Co.

Logica has turned to Rothschild's Warner Mandel, Jeremy Millard and Nick Ivey; Bank of America Merrill Lynch's Simon Gorringe, Guy Hayward-Cole and Andrew Tusa; and Deutsche Bank AG's Charles Wilkinson, Richard Sheppard and Charles Bryant. Bank of America Merrill Lynch and Deutsche Bank are also acting as joint corporate brokers to Logica.

A Sullivan & Cromwell LLP team led by Tim Emmerson and Ben Perry is providing CGI's legal advice. Freshfields Bruckhaus Deringer LLP's Andrew Hutchings, David Sonter and Simon Evans are assisting Logica.