Ciber Files For Chapter 11, Takes $50M Capgemini Bid To Buy North America, India Assets

Ciber has filed for Chapter 11 bankruptcy protection and entered into a "stalking horse" agreement for Capgemini to purchase its $275 million North America and India businesses.

Paris-based Capgemini, No. 6 on the CRN Solution Provider 500, said the $50 million purchase would increase the footprint of its U.S. technology and engineering services business and reinforce Capgemini's ability to deliver locally to clients across key North American markets. The sale process is subject to higher and better offers, according to the companies, and has to be approved by the bankruptcy court.

"The proposed sale will preserve jobs, ensure customers can benefit from continuity of services, and enable a smooth transition of Ciber's U.S. business to Capgemini or any other bidder providing a higher and better offer in accordance with court-approved procedures," Michael Boustridge, Ciber's president and CEO, said in a statement.

[RELATED: Ciber CFO: Without A Significant Deal, Our Ability To Continue Going Is In 'Substantial Doubt']

Ciber's stock was down $0.06 (19.35 percent) to $0.25 per share in pre-market trading Monday, while Capgemini's stock is down 0.42 percent to $92.80 per share. The New York Stock Exchange announced Monday that it has suspended trading of Ciber's stock and is launching proceedings to delist the stock due to the Chapter 11 filing and the ultimate effect of the process on the value of Ciber's stock.

The Chapter 11 filing - with U.S. Bankruptcy Court in Delaware - came about because of Ciber's defaulting on its credit facility from Wells Fargo, which had a $28.5 million outstanding balance as of Friday. Ciber has a commitment for up to $41 million of debtor-in-possession financing – subject to bankruptcy court approval – that would provide the company with the liquidity needed to maintain its U.S. operations during the Chapter 11 process.

Adding Greenwood Village, Colo.-based Ciber's 2,000 U.S. and 1,000 Indian consultants would grow Capgemini's North American technology and engineering revenues more than 50 percent and represent more than 15 percent of the company's overall North American business. The acquisition is expected to close by the end of June, Capgemini said.

Capgemini said it was impressed by Ciber's presence with key Fortune 1000 clients in the automotive, telecom and media sectors. Ciber's employees will be offered new positions with similar terms within Capgemini, the company said, and will benefit from Capgemini's enhanced capabilities and global footprint. Neither Capgemini nor Ciber -- No. 43 on the CRN Solution Provider 500 -- immediately responded to requests for additional comment.

A straightforward and well-contained integration process should help rationalize Ciber's overhead costs and drive a return to profitability for the company's operations, Capgemini said. Ciber will have a negative less-than-20-basis-point impact of Capgemini's operating margins in 2017, the company said, but should help grow Capgemini's earnings per share by the first half of 2018.

Ciber CEO Boustridge said the company explored selling the company outside of Chapter 11, selling certain Ciber assets, and other transactions to restructure the balance sheet or raise capital. But after a careful consideration of the alternatives, Boustridge said it became clear that Ciber's best path forward was to accomplish a sale through the bankruptcy process.

Meanwhile, Ciber's board of directors named Jon Goulding – a managing director at restructuring firm Alvarez and Marsal – as chief restructuring officer to help facilitate this process. Boustridge said Ciber is keenly focused on minimizing disruptions to customers, partners and employees during the Chapter 11 process.

Capgemini said it's committed to the continuity of Ciber's North American business, and will ensure that employees continue to operate seamlessly with clients through the process. The company greatly expanded its presence in North America – which now accounts for 30 percent of overall revenue – through its July 2015 acquisition of $1.3 billion solution provider iGate of Bridgewater, N.J.

Ciber CFO Christian Metzger said last month that the solution provider's future was uncertain if it was unable to repay Wells Fargo by the end of March.

"Without a transaction sufficient to address the company's financial situation, the company expects to conclude … that there is a substantial doubt about the company's ability to continue as a going concern," Metzger wrote in a March filing with the U.S. Securities and Exchange Commission (SEC).

Technology management solution provider Ameri100 -- which owns 5.5 percent of Ciber -- announced last month that is had offered to buy Ciber for $0.75 per share, a substantial premium over the company's stock price at the time. Ciber said it was carefully reviewing and considering Ameri100's offer to determine if it was in the best interest of the company and its shareholders.

Both Ameri100 and Legion Partners – which holds 14.99 percent of Ciber's outstanding shares – submitted nominations last month for two independent directors to Ciber's board.