Talks to Acquire CSC Are Said to Falter; Its Shares Drop 12%

Shares of Computer Sciences Corp. fell nearly 12% on Monday after reports that a group of potential buyers had abandoned talks to acquire the El Segundo-based computer services company.

The stock had gained 20% in one month on reports that defense contractor Lockheed Martin Corp. and three equity firms were in talks to buy the company, whose biggest client is the federal government. Those reports cited people familiar with the matter.

On Monday, at least two securities firms -- Legg Mason and Wachovia -- cut their ratings on CSC, saying the stock’s recent gain was attributable to reports of the company’s sale and not its earnings prospects.

CSC insisted on $65 a share as a starting point for negotiations, but its suitors had not made a binding commitment to that price, according to the Wall Street Journal, which first reported Saturday that the talks had broken down.

That figure was an 18.5% premium over CSC’s closing price Friday of $54.85. On Monday, the stock shares fell $6.47, or 11.8%, to $48.38.

Lockheed, based in Bethesda, Md., was joined in the talks by buyout firms Blackstone Group, Warburg Pincus and Texas Pacific Group, people familiar with the matter told Reuters.

About one-third of CSC’s revenue comes from providing computer services and consulting for the military, the CIA and other federal agencies. Lockheed was bidding for that government business, sources told Reuters.

The sources said the three equity firms were looking at jointly buying the rest of CSC’s computer services business, whose customers include Ascension Health, the nation’s largest not-for-profit Catholic healthcare system; General Dynamics Corp.; Scandinavian airline operator SAS; and Zurich Financial Services of Switzerland.