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CMG, Logica confirm merger talks

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CMG and Logica are mulling over merger opportunities. They were probably not ready to go public - the talks are in early stages - but a scoop in today's Times, left them with little choice.

There are two big areas to concentrate on cost-savings and: messaging software for the mobile networks; and business services/outsourcing/contract programming. One obvious route would be to merge the respective operations and split the two very different sides of the business. Maybe that will come later.

CMG and Logica are the dominant suppliers in Europe for text-based SMS services, but they are facing much tougher competition for next-gen messaging contracts.

Recent results for IT services companies - most recently EDS - show that they too are suffering badly in the IT recession.

If a merger takes place, Logica shareholders will control 60 per cent of the equity of the enlarged group, and CMG shareholders will have the rest. Cor Stutterheim, CMG's executive chairman, would be non-exec chairman of the new group, while Martin Read, top banana at Logica, would assume the helm as chief executive of the new group.

The companies are back to the negotiating table. They say they will make no announcements for several weeks. One way or another. ®

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