Permira, the private equity firm, is investigating the possibility of launching a takeover bid for LogicaCMG, after the announcement that Martin Read would step down as chief executive.

Several other private equity firms, including Blackstone and Kohlberg Kravis Roberts, are also likely to consider a move for the London-based IT services group. Permira teamed up with Centaurus Capital, the hedge fund, recently to make an offer for Atos Origin, the French IT services firm. However, they walked away after conducting due diligence.

LogicaCMG could act as a vehicle for a private equity group looking to consolidate the industry. It could also attract the attention of rival IT groups. Analysts have played down the possibility that a buyer would seek to break up the business.

Should an offer emerge, it would be only the latest attempt by private equity to buy a key IT industry player. Last year Permira dropped its support for a management buyout of Misys, the IT group. Northgate Information Solutions attracted a string of approaches but turned them down because bids were not high enough.

The news comes after Morley Fund Management raised concerns over Dr Read’s continued tenure in the wake of a profits warning that sent the shares tumbling last week. Morley is understood to have spoken for big shareholders representing about 20 per cent of the group’s equity. Another key shareholder, thought to be UBS, also raised concerns.

Shares in the group rose 4½p to 161½p yesterday on confirmation that Dr Read would “accelerate” his retirement plans. The 57-year-old executive, who has been with the group for 14 years, will remain until it appoints a successor.

LogicaCMG is in the process of recruiting a headhunter to begin the search for a chief executive and will look internally and externally for candidates. Seamus Keating, its finance director, and Jim McKenna, the chief operating officer, are said to be possible internal replacements.

Analysts said that it was unlikely that shareholders would endorse an internal appointment. One said: “There is a sigh of relief going around the City today: you can see that in the share price and it would be wrong to deaden that by appointing someone internally.”

There are also questions over the future of Cor Stutterheim, LogicaCMG’s nonexecutive chairman, whose three-year term ends in May next year. If he chooses not to stand for reelection or steps down beforehand, he could gain about £1.9 million through his shareholding, and a pension worth £3.8 million.

As well as announcing Dr Read’s departure over the weekend, LogicaCMG said that it would restructure its board after investor concerns over corporate governance.

The company is seeking a nonexecutive director.

This week it emerged that Gérard Philippot, the former chairman of Unilog, which LogicaCMG bought for £630 million two years ago, was paid €300,000 (£204,000) in consultancy fees on top of the £33,000 that he was paid as a nonexecutive director at the group, to help to integrate Unilog into LogicaCMG. Mr Philippot, previously the largest shareholder on the board at LogicaCMG, netted £15 million from selling more than 8.6 million shares between March 12 and March 16 this year, just before his consultancy agreement with the company ended on March 31.

— £630m The amount paid for Unilog by LogicaCMG in 2005

Source: Times archives

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