Read to become head of £1bn group if Logica and CMG merger talks succeed

Dr Martin Read, the chief executive of Logica, will stay at the helm if the IT services company's proposed merger with rival Anglo-Dutch group CMG goes ahead.

Shareholders in Logica will own 60 per cent of the combined company with shareholders in CMG keeping the balance.

The pair yesterday confirmed they were in early stage talks about combining their businesses through a deal that would be structured as an all-share merger. Shares in Logica and CMG, both former members of the FTSE 100, closed up 7.8 per cent at 134.75p and 45.6 per cent at 58.25p, respectively.

A deal would create a company worth nearly £1bn with combined sales of about £1.9bn. Cor Stutterheim, CMG's executive chairman, would become non-executive chairman.

Alistair Crawford, CMG's chief executive, was yesterday still without a role although the companies were said to be discussing what position he might take.

The position of finance director still hangs in the balance. David Robbie is CMG's finance director, while Seamus Keating is his counterpart at Logica.

A deal would also almost certainly result in job losses among the pair's combined workforce. Logica employs about 10,000 staff while CMG has roughly 13,000 workers. Analysts at CSFB estimated that as many as 4,000 positions could be at risk. Logica and CMG admitted the tie-up would produce "scope for significant operating cost savings across the combined businesses".

They also noted that a deal "could create one of Europe's largest-quoted IT services businesses and a leading company in mobile messaging software".

City analysts said a merger made strategic sense but had reservations over whether the company's respective management teams could agree.

JP Morgan analysts said they were also concerned over whether the two groups would be a good fit and whether management could agree on board appointments.