MONTRÉAL - CGI Inc. (TSX: GIB.A) (NYSE: GIB), a global IT and business consulting services firm, has announced its intention to repurchase 1,674,930 of its Class A subordinate voting shares from the company's founder, Mr. Serge Godin. The transaction is valued at $250 million, with the shares being purchased for cancellation at a price of $149.26 each, a 3% discount to the closing price on the Toronto Stock Exchange as of February 22, 2024.
The repurchase is part of a private agreement and is expected to occur later today. This move comes under CGI's normal course issuer bid (NCIB), which began on February 6, 2024, and allows the company to buy back up to 20,457,737 Class A Shares before February 5, 2025.
A Special Committee of independent directors of CGI's Board, after consulting with Norton Rose Fulbright Canada LLP and National Bank Financial Inc., recommended the transaction, which was then unanimously approved by the Board of Directors. Mr. Godin abstained from the decision-making process. The Autorité des marchés financiers has granted an exemption from issuer bid requirements for this transaction.
Upon completion of the repurchase, CGI will have 206,130,115 Class A Shares and 25,179,340 Class B shares outstanding. Mr. Godin's ownership will adjust to 53.0% of total voting rights and 10.5% of the issued and outstanding shares, a slight decrease from his previous stake.
Michael B. Pedersen, Chair of the Special Committee, stated that the transaction offers immediate value to shareholders by repurchasing shares at a discount. The repurchase is reportedly for estate planning purposes by Mr. Godin.
CGI, established in 1976, is one of the largest independent IT and business consulting services firms. The company reported revenues of $14.30 billion in fiscal 2023 and operates with a global delivery network that assists clients in digital transformation.
This article is based on a press release statement from CGI Inc.
InvestingPro Insights
In light of CGI Inc.'s recent announcement to repurchase shares from its founder, investors may find the following insights from InvestingPro valuable. The company, a prominent player in the IT Services industry, is trading near its 52-week high, with its price at 98.31% of this peak. This demonstrates investor confidence and a strong market performance over the past year, as evidenced by a 25.13% return on the price over the last twelve months as of early 2024.
From a financial standpoint, CGI Inc. boasts a market capitalization of $26.27 billion, reflecting its significant presence in the market. While the company's P/E ratio stands at 21.85, its adjusted P/E ratio for the last twelve months as of Q1 2024 is slightly lower at 20.73. This suggests that while the company trades at a high valuation relative to near-term earnings growth, as noted in one of the InvestingPro Tips, it has shown some improvement over time. Additionally, the company's revenue growth for the last twelve months as of Q1 2024 is a solid 9.26%, indicating a strong upward trend in its financial performance.
CGI Inc. is also noted for its low price volatility, which may appeal to investors looking for stable investments in the IT sector. The company's ability to generate cash flows that can sufficiently cover interest payments is a reassuring sign of financial health and operational efficiency. Moreover, CGI operates with a moderate level of debt, which is a positive indicator of its risk management strategies.
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