Anglo-Dutch IT services group LogicaCMG is planning to raise about £389 million in new shares to help fund the acquisition of a French rival.
The firm, which unsettled investors when it announced it was in talks over Paris-based Unilog on Friday, has made a £630.6 million offer that it said would "significantly" strengthen its position in Europe.
Logica yesterday said a deal would allow it to cross-sell its own services to Unilog's catalogue of blue-chip European customers, which include media giant Vivendi, Renault and energy firm EDF.
The company told shareholders that the one-for-two rights issue would be at 107 pence each, a 36 per cent discount to its closing share price of 168 pence last week.
The move is the first time that a foreign company has made an approach for a French group since rumours of a possible US bid for Danone caused an outcry in France.
The proposed tie-up, which is subject to shareholder approval, would achieve Logica's aim of gaining scale in France and Germany where it has been losing cash for more than two years.
It would create the fourth biggest player in the French market, complementing Logica's strong positions in the UK and the Netherlands, and is expected to create annual cost savings of around £19 million.
Logica said it would allow it to cash in on increasing demand for outsourced and offshore services in France.
The group would also benefit from the trend towards complex and larger contracts being offered to a smaller number of larger suppliers.
Investors have raised concerns about Logica's ability to digest a major deal after the merger of Logica and CMG in 2002 failed to deliver instant benefits.
Unilog's chief operations are in providing IT services, outsourcing, and systems integration which deliver margins in excess of ten per cent, and it is the sixth-biggest player in the French market.
Logica chief executive Martin Read said the companies had complementary client bases and operational strengths.
He said: "There are exciting opportunities to cross-sell capabilities across the two businesses."
The news comes just two weeks after Logica told investors that challenging markets in France and a restructuring of its troubled operations in Germany had harmed its results for 2004.