Computer Sciences Might Receive Offer
Shares of Computer Sciences Corp. rose 11% on Monday for their biggest gain in more than three years after a newspaper reported that private equity firms might try to buy the company.
El Segundo-based Computer Sciences might receive an offer from a group of firms including Warburg Pincus, Texas Pacific Group and Blackstone Group, the Wall Street Journal reported, citing people familiar with the matter. The plans are at an early stage and might come to nothing, the report said.
Buyout firms led by Silver Lake Partners bought competitor SunGard Data Systems Inc. for $11.3 billion in July and may have sparked interest in the field, UBS analyst Adam Frisch said in an interview. A third of Computer Sciences’ sales come from the U.S. government. The company has a market value of $9.3 billion.
“Speculation about private equity firms increasing their interests in the [information technology] services sector likely increased after the SunGard deal was announced,” said Frisch, who rates Computer Sciences shares “buy.”
Company spokesman Michael Dickerson declined to comment.
In February, the company sold a division that provided security in Iraq for $850 million, and in April it shed a unit that developed software for the healthcare industry.
Computer Sciences shares rose $5.06 to $50.41, the largest one-day gain since May 2002.
Computer Sciences, which manages computers for the FBI and the Internal Revenue Service, traded for 14 times estimated profit Friday, before the buyout interest was reported. Competitors Electronic Data Systems Corp. and Accenture Ltd. traded at 39 times and 17 times, respectively.
The company expects profit this fiscal year to fall to $3.30 a share or less from $4.22 a year earlier, after selling its military security business DynCorp International and its Health Plans Solutions unit. Sales might rise as much as 8% to $15.2 billion, the company said in August.
Texas Pacific spokesman Owen Blicksilver, Blackstone spokesman John Ford and Warburg Pincus spokesman Christopher Jun declined to comment.
Software company Computer Associates International Inc., based in Islandia, N.Y., tried to buy Computer Sciences in a $9.8-billion hostile bid in 1998.
Competitors in military contracting include General Dynamics Corp., Northrop Grumman Corp. and Lockheed Martin Corp. Computer Sciences last month reported 99 U.S. government contract signings and extensions with General Dynamics worth a total of $910.5 million. Computer Sciences also competes with IBM Corp. and Indian firms such as Wipro Ltd.
