Below is a report from Bloomberg dated 29 September . The full story can be found on:
<< Computer Sciences Corp. (CSC), a technology consultant for governments and companies, has contacted private-equity firms including Blackstone Group LP (BX) and Bain Capital LLC to gauge their interest in a leveraged buyout, people with knowledge of the matter said.
The talks are at an early stage and may not result in a deal, according to the people, who asked not to be named because the negotiations are private. CSC, as the company is known, provides information technology services to clients including NASA and Avis Budget Group Inc.
CSC rose 5.3 percent to $59.62 in New York trading yesterday, giving the company a market value of about $8.65 billion. If it goes private, CSC’s would be the largest leveraged buyout since Michael Dell and Silver Lake Management LLC acquired Dell Inc. for more than $16 billion last year.
CSC Chief Executive Officer Mike Lawrie is trying to convince potential suitors that a turnaround at the company, which he took over in 2012, is halfway done, one of the people said. Lawrie is arguing that buyers could benefit as the reorganization continues, the person said.
Private-equity funds view Falls Church, Virginia-based CSC as a potentially cheap buyout based on enterprise value to earnings before interest, taxes, depreciation and amortization, though are concerned by its cash flow and slower-growth business units, one person said.
The buyout funds are once again spending billions on enterprise technology businesses. Tibco Software Inc. announced yesterday it reached a deal to be bought by Vista Equity Partners for $4.3 billion, following Compuware Corp.’s $2.5 billion buyout by Thoma Bravo LLC earlier this month.
Rich Adamonis, a spokesman for CSC, said the company doesn’t comment on market rumors. Christine Anderson, a spokeswoman for Blackstone, declined to comment, as did Charlyn Lusk, a spokeswoman for Bain at Stanton Public Relations & Marketing.
CSC runs data centers for the U.S. government and also has a separate commercial business for consumer, financial, defense and health-care companies. A deal could be structured where the businesses are split, with a private-equity firm buying one unit and a strategic suitor buying the other, one of the people said.
The company said Sept. 16 its controller and principal accounting officer, Thomas Colan, is stepping down for personal reasons after two years in the role. Colan will assist in the transition of his interim replacement, Michael Sweeney, according to a statement.
A spokesman for the company said then that Colan’s departure isn’t related to the U.S. Securities and Exchange Commission’s investigation into the company’s accounting, which started in January 2011, before Colan joined CSC.
This is at least the third time since 2005 that CSC has fielded interest from possible buyers.
The company said in April 2006 it was exploring options including a sale after the Wall Street Journal reported it was talking to a number of parties. In November of the previous year, CSC nearly sold itself to a consortium of Blackstone, Warburg Pincus LLC, TPG Capital Management LP and Lockheed Martin Corp. before the talks ended, the Journal reported then. >>
(End of quote from Bloomberg)
This report comes as no surprise. It is our opinion that CEO Mike Lawrie’s objective since joining CSC has been to sell or break up the company, not to rebuild it as an independent entity.
We believe that CSC’s current share price cannot be sustained in the long term, as we think Mr Lawrie and his management team cannot generate revenue growth and their cost cutting programs have taken the company about as far as it can go. See the news on Tesco; one of the largest supermarket chains in the world, for how analysts can miss the obvious signs of 'good' results while sales are in decline.
So it seems that Mike Lawrie has decided he must actively seek out buyers. We think he needs to do this quickly before the CSC share price bubble bursts.
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