CGI May Acquire Failed INSpire's Assets

By Ara C. Trembly, NU Technology Editor

NU Online News Service, Sept. 11, 11:58 a.m. EST?INSpire Insurance Solutions, Inc. has announced the signing of a non-binding letter of intent under which the CGI Group, Inc. would purchase the bankrupt INSpire's operating assets.

According to Fort Worth, Texas-based INSpire, the purchased assets would be integrated within CGI, which would continue to offers INSpire's policy and claims administration outsourcing, IT outsourcing, and software services. CGI is based in Toronto.

"Through this acquisition, CGI would extend its ability to provide technology solutions to the insurance market and expand its significant business processing services capabilities," said INSpire in announcing the anticipated acquisition.

INSpire, currently operating under Chapter 11 bankruptcy protection, said it has filed motions with the United States Bankruptcy Court for the Northern District of Texas to begin the sales process. The company's reorganization plan "is subject to continuing negotiations and contemplates the sale of [INSpire's] operating assets to CGI Group, Inc.," said INSpire in a subsequent announcement.

According to the letter of intent, INSpire explained, the purchase price is $8.2 million, a figure which "may be subject to adjustment prior to the closing of the transaction." Execution of a definitive purchase agreement is subject to the bankruptcy court's approval of the plan and "negotiation of an agreement satisfactory to both parties," INSpire noted.

"After evaluating all its alternatives, INSpire has concluded that a sale is in the best interest of all its stakeholders," said the INSpire announcement.

The company said, "An independent INSpire would lack the resources necessary to attain the vision of transforming INSpire into a major player in the insurance services industry. Under the anticipated agreement, customers will continue to receive existing services and have access to significantly greater resources."

According to Eileen Murphy, director of media relations for CGI, the "due diligence phase" of the sales process will continue until "mid-November to December." During that period, she noted, "we will be assessing everything."

Ms. Murphy said CGI is pursuing INSpire because they are specialists in business products outsourcing. "Insurance is a huge area for us," she noted. "Forty-five percent of our revenue is in the financial services area."

She added that niche acquisitions of companies are part of CGI's growth strategy. "Acquisitions are a strong focus for us," she said. "We've purchased 14 companies in the past year, the biggest of which was IMR Global."

Asked about possible staff reductions should the sale go through, Ms. Murphy stated, "At this point, we don't know." She said it was "too early to answer questions" about issues like operational redundancies and executives in charge of the purchased business operations.

"CGI is getting INSpire for cheap," commented Judy Johnson, vice president, insurance information strategies, for the Stamford, Conn.-based Meta Group, a research organization. "What they're trying to do is increase their penetration in North America and get a piece of the business process outsourcing pie." In doing so, she added, CGI would be competing with companies such as EDS and Computer Sciences Corporation.

"[CGI gets] intellectual property and customers and they get some expertise on how to run business process outsourcing for specific business functions. They get it very cheaply by buying INSpire," Ms. Johnson observed.

"I am not confident that it will work," said Ms. Johnson of the anticipated sale and takeover of business functions. She pointed out that INSpire customers are on the "low end of the mid-tier market," while "CGI is looking to play into the $600 million and above market. It may be a mismatch between what INSpire has to offer and CGI's expectation. But the price is right and it's not like CGI is going to break the bank doing this."

If the reorganization plan is approved, INSpire's existing common stock will be canceled on the effective date, the company said. Under the plan, any money the company receives (and remaining assets, if any) will be transferred to a trust.

Cash proceeds from the trust will be used to satisfy claims of the company. Once creditors are paid and expenses of implementing the reorganization are satisfied, any remaining cash will be divided pro rata to shareholders, according to shares of common stock held as of the effective date.

"At this time," said the INSpire announcement, "the company is unable to determine whether there will be any remaining cash to distribute to shareholders."

INSpire, which had issued the announcements on the anticipated sale, refused to answer any questions related to the announcements.

According to the Fort Worth Star-Telegram, INSpire filed for bankruptcy in February, then reported a loss of nearly $68 million for 2001, more than double the company's $30 million loss during 2000. The drop in revenues was attributed in large part to cancellation of two major contracts with the Roberts Plan and Island Group.

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CGI May Acquire Failed INSpire's Assets

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