CGI announces intent to repurchase 2.89 million of its shares held by CDPQ

Rhea-AI Summary

CGI (TSX: GIB.A, NYSE: GIB) announced on May 27, 2024, its plan to repurchase 2,887,878 Class A subordinate voting shares from CDPQ for $138.51 per share. This is part of CDPQ's portfolio rebalancing. Post-transaction, CDPQ will still hold approximately 16.29 million Class A shares, representing 7.15% of CGI's total outstanding shares. The move aligns with CGI's strategy to deliver value to shareholders, supported by its strong financials, including $2.8 billion in cash as of March 2024. The share buyback falls under CGI's NCIB program, allowing repurchase up to 20,457,737 shares by February 2025. Details will be available on SEDAR+.

Positive

• Repurchase of 2.89 million shares at a discount price of $138.51 each is favorable for existing shareholders.
• Post-repurchase, CDPQ will still hold 7.15% of CGI, reflecting continued strong institutional backing.
• CGI has $2.8 billion in cash as of March 2024, showing robust financial health.
• The share buyback aligns with CGI's strategy to deliver accretive value to shareholders.
• AMF exemption allows the transaction to proceed without issuer bid requirements, facilitating smoother execution.

Negative

• No additional press release will be issued regarding the share repurchase, potentially limiting investor transparency.

Insights

Financial Analyst

CGI's decision to repurchase 2.89 million shares is a strategic move that often signifies confidence in the company's financial health and future prospects. By buying back its own shares, CGI effectively reduces the number of outstanding shares, which can increase earnings per share (EPS) and potentially boost the stock price.

The $138.51 per share price tag, which is below the closing price, underscores management's belief that the company's stock is undervalued. This action can also be interpreted as a way to return value to shareholders without distributing cash dividends, which can be more tax-efficient for investors.

From a financial perspective, with $2.8 billion in cash available, CGI demonstrates considerable liquidity, enabling them to execute such buybacks while still having ample resources for other strategic initiatives. This move is in line with their Build and Buy strategy, indicating that they are confident about maintaining strong cash flow and profitability.

Market Research Analyst

This share repurchase can be seen as an effort by CGI to enhance shareholder value. The reduced share count can make the remaining shares more valuable, assuming the company continues to perform well. The fact that the repurchase is part of a periodic rebalancing by CDPQ rather than an emergency sale is also positive. It suggests that CDPQ's stake reduction is strategic rather than a lack of confidence in CGI.

Additionally, obtaining a favorable decision from the Autorité des marchés financiers to exempt CGI from issuer bid requirements shows regulatory support and streamlines the process. This could be seen by investors as an indication of the company's solid standing with regulatory bodies.

Stock Market Symbols
GIB.A (TSX)
GIB (NYSE)
cgi.com/en/newsroom

MONTRÉAL, May 27, 2024 /PRNewswire/ - CGI (TSX: GIB.A) (NYSE: GIB) announced today that it intends to enter into a private agreement with CDPQ for the purchase for cancellation of 2,887,878 of its Class A subordinate voting shares ("Class A Shares") held by CDPQ for a price of $138.51 per Class A Share, which represents a discount to the closing price on May 27, 2024 of the Class A Shares on the Toronto Stock Exchange ("TSX").

The transaction will be made in connection with the periodic portfolio rebalancing of CDPQ. Once completed, CDPQ will continue to hold approximately 16.29 million Class A Shares, representing approximately 7.15% of CGI's total outstanding shares.

"CGI is an international leader in the IT industry and continues to stand out with its sustained growth and operational excellence, benefiting its shareholders," highlights Kim Thomassin, Executive Vice-President and Head of Québec at CDPQ. "We will remain a major shareholder of the company following this repurchase, and continue our commitment of over 30 years in supporting CGI's expansion."

"This transaction is consistent with CGI's strategy to continuously deliver accretive value to our shareholders," said Julie Godin, Co-Chair of the Board, CGI. "With strong profitability and cash generation—including $2.8 billion of cash readily available as at the end of March 2024—CGI's financial strength reflects our ongoing resilience and capacity to execute on our Build and Buy profitable growth strategy."

A favorable decision was obtained from the Autorité des marchés financiers ("AMF") to exempt CGI from the issuer bid requirements under applicable securities legislation. The transaction is expected to be entered into later today and settled on May 29, 2024.

The share repurchase will be made under CGI's normal course issuer bid ("NCIB"), the renewal of which was announced on January 31, 2024. Under the NCIB, CGI is authorized to repurchase up to 20,457,737 Class A Shares by February 5, 2025. The NCIB allows for purchases outside the facilities of the TSX by private agreements pursuant to exemption orders issued by securities regulators. As at May 27, 2024, CGI had repurchased 2,361,530 Class A Shares under its current NCIB.

Information regarding the share repurchase, including the number of Class A Shares purchased for cancellation and aggregate price paid, will be available on the SEDAR+ website at www.sedarplus.ca following the completion thereof. CGI will not issue any additional press release in respect of this share repurchase.

About CGI
Founded in 1976, CGI is among the largest independent IT and business consulting services firms in the world. With 90,000 consultants and professionals across the globe, CGI delivers an end-to-end portfolio of capabilities, from strategic IT and business consulting to systems integration, managed IT and business process services and intellectual property solutions. CGI works with clients through a local relationship model complemented by a global delivery network that helps clients digitally transform their organizations and accelerate results. CGI Fiscal 2023 reported revenue is $14.30 billion and CGI shares are listed on the TSX (GIB.A) and the NYSE (GIB). Learn more at cgi.com.

About CDPQ
At CDPQ, we invest constructively to generate sustainable returns over the long term. As a global investment group managing funds for public pension and insurance plans, we work alongside our partners to build enterprises that drive performance and progress. We are active in the major financial markets, private equity, infrastructure, real estate and private debt. As at December 31, 2023, CDPQ's net assets totalled CAD 434 billion. For more information, visit cdpq.com, consult our LinkedIn or Instagram pages, or follow us on X.

CDPQ is a registered trademark owned by Caisse de dépôt et placement du Québec and licensed for use by its subsidiaries.

Forward-looking information and statements
This press release contains "forward-looking information" within the meaning of Canadian securities laws and "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable United States safe harbours. All such forward-looking information and statements are made and disclosed in reliance upon the safe harbour provisions of applicable Canadian and United States securities laws. Forward-looking information and statements include all information and statements regarding CGI's intentions, plans, expectations, beliefs, objectives, future performance, and strategy, as well as any other information or statements that relate to future events or circumstances and which do not directly and exclusively relate to historical facts. Forward-looking information and statements often but not always use words such as "believe", "estimate", "expect", "intend", "anticipate", "foresee", "plan", "predict", "project", "aim", "seek", "strive", "potential", "continue", "target", "may", "might", "could", "should", and similar expressions and variations thereof. These information and statements are based on our perception of historic trends, current conditions and expected future developments, as well as other assumptions, both general and specific, that we believe are appropriate in the circumstances. Such information and statements are, however, by their very nature, subject to inherent risks and uncertainties, of which many are beyond the control of CGI, and which give rise to the possibility that actual results could differ materially from our expectations expressed in, or implied by, such forward-looking information or forward-looking statements. These risks and uncertainties include but are not restricted to: risks related to the market such as the level of business activity of our clients, which is affected by economic and political conditions, additional external risks (such as pandemics, armed conflict, climate-related issues and inflation) and our ability to negotiate new contracts; risks related to our industry such as competition and our ability to develop and expand our services to address emerging business demands and technology trends (such as artificial intelligence), to penetrate new markets, and to protect our intellectual property rights; risks related to our business such as risks associated with our growth strategy, including the integration of new operations, financial and operational risks inherent in worldwide operations, foreign exchange risks, income tax laws and other tax programs, the termination, modification, delay or suspension of our contractual agreements, our expectations regarding future revenue resulting from bookings and backlog, our ability to attract and retain qualified employees, to negotiate favourable contractual terms, to deliver our services and to collect receivables, to disclose, manage and implement environmental, social and governance (ESG) initiatives and standards, and to achieve ESG commitments and targets, including without limitation, our commitment to net-zero carbon emissions, as well as the reputational and financial risks attendant to cybersecurity breaches and other incidents, including through the use of artificial intelligence, and financial risks such as liquidity needs and requirements, maintenance of financial ratios, interest rate fluctuations and changes in creditworthiness and credit ratings; as well as other risks identified or incorporated by reference in this press release, in CGI's annual and quarterly MD&A and in other documents that we make public, including our filings with the Canadian Securities Administrators (on SEDAR+ at www.sedarplus.ca) and the U.S. Securities and Exchange Commission (on EDGAR at www.sec.gov). Unless otherwise stated, the forward-looking information and statements contained in this press release are made as of the date hereof and CGI disclaims any intention or obligation to publicly update or revise any forward-looking information or forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. While we believe that our assumptions on which these forward-looking information and forward-looking statements are based were reasonable as at the date of this press release, readers are cautioned not to place undue reliance on these forward-looking information or statements. Furthermore, readers are reminded that forward-looking information and statements are presented for the sole purpose of assisting investors and others in understanding our objectives, strategic priorities and business outlook as well as our anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

Further information on the risks that could cause our actual results to differ significantly from our current expectations may be found in the section titled Risk Environment of CGI's annual and quarterly MD&A, which is incorporated by reference in this cautionary statement. We also caution readers that the above-mentioned risks and the risks disclosed in CGI's annual and quarterly MD&A and other documents and filings are not the only ones that could affect us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could also have a material adverse effect on our financial position, financial performance, cash flows, business or reputation. 

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SOURCE CGI Inc.

FAQ

What is the stock symbol for CGI?

CGI's stock symbols are GIB.A on the TSX and GIB on the NYSE.

How many shares is CGI repurchasing from CDPQ?

CGI is repurchasing 2,887,878 Class A subordinate voting shares from CDPQ.

What is the repurchase price per share for CGI's buyback from CDPQ?

The repurchase price is $138.51 per Class A share.

When will the CGI share repurchase be settled?

The transaction is expected to be settled on May 29, 2024.

What percentage of CGI's total shares will CDPQ hold after the repurchase?

CDPQ will hold approximately 7.15% of CGI's total outstanding shares after the repurchase.

How much cash did CGI have available at the end of March 2024?

CGI had $2.8 billion in cash readily available as of March 2024.

Under what program is CGI conducting its share repurchase?

CGI is conducting its share repurchase under its normal course issuer bid (NCIB) program.

How many shares is CGI authorized to repurchase under the NCIB program?

CGI is authorized to repurchase up to 20,457,737 Class A shares under the NCIB program by February 5, 2025.

Where can information about CGI's share repurchase be found?

Information regarding the share repurchase will be available on the SEDAR+ website.