Alithya to go public through RTO of Edgewater Technology

Photo of author

By Ted Liu

Alithya Group Inc., a portfolio company of TELUS Ventures, Capital régional et coopératif Desjardins (CRCD), Investissement Québec (IQ), and iA Financial Group, has entered into an arrangement with Edgewater Technology, Inc. (NASDAQ: EDGW) which will result in Alithya becoming a NASDAQ and the TSX listed company. The arrangement is expected to be completed during the third quarter of 2018.

Pursuant to the arrangement, Alithya shareholders and Edgewater shareholders will each exchange all of their respective outstanding shares for shares in a newly-formed holding company (New Alithya), of which Alithya and Edgewater will be wholly-owned subsidiaries. Upon completion of the arrangement, the combined company will retain the name of Alithya Group Inc. and is expected to be listed on NASDAQ and the TSX.

Edgewater shareholders will receive New Alithya common shares based on an exchange ratio of 1.3118 New Alithya common shares for each Edgewater share. Edgewater shareholders will be paid in cash a special dividend of US $20.5 million. The arrangement is expected to occur on a tax-deferred rollover basis for United States residents.

New Alithya will acquire Alithya as a wholly-owned subsidiary by issuing New Alithya common shares to current Alithya shareholders and equivalent New Alithya multi-voting shares to current Alithya multi-voting shareholders. New Alithya multi-voting shares will be equivalent in all respects to New Alithya common shares except that each New Alithya multi-voting share will have 10 votes per share.

Upon closing of the arrangement, former Alithya shareholders will hold approximately 58% of New Alithya’s total outstanding shares and the former Edgewater shareholders the remaining 42%. Effectively, the former Alithya shareholders will hold approximately 83%, and the former Edgewater shareholders approximately 17%, of the voting power of the total outstanding New Alithya shares.

The current CEO of Alithya, Paul Raymond, will become CEO of the combined company. Claude Rousseau (Alithya’s current COO) will become New Alithya’s COO and Mathieu Lupien (Alithya’s current CFO) will become New Alithya’s CFO.

New Alithya’s board of directors will consist of nine directors, of whom six will be nominated by Alithya’s current board and three by Edgewater’s current board, with Pierre Turcotte acting as the Chairman.

Ancora Advisors, LLC, which controls approximately 10% of the outstanding Edgewater shares, has entered into a voting support and lock-up agreement supporting the arrangement.

“We are extremely pleased to have reached an agreement with Edgewater”, stated Turcotte, Chairman of Alithya. “We are very excited to welcome over 400 experts from Edgewater to the Alithya family. The expertise of our two companies is very complementary and will immediately benefit all our clients as well as offer greater opportunities to our consultants and shareholders.”

Paul Raymond added: “Today, clients are looking for digital technology consulting companies that are strategic partners, understand their reality, and have the flexibility to rapidly integrate packaged solutions or deliver tailored solutions to best meet their business objectives. They want a partner who is agile and can rapidly make a difference for their business. This approach and the quality of our people have positioned us as one of the fastest growing companies in our sector. We believe that, together with Edgewater, we can pursue growth while maintaining the values that have set us apart. This is why we are convinced that bringing our companies together is a great outcome for our clients, our consultants and our respective shareholders.”

“This transaction will give Edgewater the scale and depth required to compete at a superior level”, mentioned Jeffrey Rutherford, interim CEO and Chairman of Edgewater’s Board of Directors. “We went through a very detailed strategic process and were very impressed by Alithya’s management and reputation as a growing corporation. We believe the combination with Alithya is our best alternative to ensure the ongoing high-quality services to our customers, to give our consultants better career opportunities and to also provide our shareholders with solid, long-term growth perspectives.”

“We believe the combination of Edgewater and Alithya creates a differentiated, leading North American IT platform and provides significant value for existing Edgewater shareholders through a meaningful dividend at close and opportunity for further upside as revenue and cost synergies are achieved.” explained Fred DiSanto, Chairman and CEO of Ancora Advisors, LLC. “We are enthusiastic about the strategic direction of the combined company and are excited to work with Alithya’s management team to maximize value for all shareholders.”

Desjardins Capital Markets is acting as financial advisor to Alithya in connection with the arrangement and Osler, Hoskin & Harcourt LLP was engaged as counsel to act on behalf of Alithya.

William Blair & Company is acting as financial advisor to Edgewater in connection with arrangement and McDonald Hopkins LLC was engaged as counsel to act on behalf of Edgewater.

photo credit: Alithya