Computer Sciences Corporation (NYSE:CSC) is reportedly in advance negotiations to sell itself to a financial sponsor and a foreign entity, according to Dealreporter based on information from two people with knowledge about the situation.
The stock price of Computer Sciences Corporation more than 7% to $71.74 per share based sale speculations.
Computer Sciences proposed deal structure
The report indicated that Computer Sciences in in talks to sell its North American public sector (NPS) segment, which is composed its government services business to a financial sponsor.
Computer Sciences is also trying to negotiate the sale of its two other business units (global business services and global infrastructure services) to a foreign strategic partner.
One of the sources indicated the Computer Sciences’ discussions with the strategic partner is “fairly in advanced stage.” The person said the company’s has been in negotiations with the financial sponsor for approximately two months.
The sources warned that there is possibility that the discussions will collapse. They people cannot identify the name of the financial sponsor or the foreign entity. A spokesperson for Computer Sciences emphasized that the company has a standing policy not to comment on rumors or speculations.
In September, last year, Bloomberg reported that Computer Sciences reached out to several private equity firms including Bain Capital, Blackstone Group to weigh their interest on a potential leveraged buyout.
At the time, that Mike Lawrie, CEO of Computer Sciences was trying to convince potential buyers that the company’s turnaround efforts is almost 50% complete, according to the report. Lawrie was telling buyers that acquiring the company will be beneficial as the reorganization continues.
In 2006, the Wall Street Journal reported that Computer Sciences was exploring options including a sale to several parties. A year earlier, the company was close to reaching a deal to sell itself to a consortium of buyers including Blackstone, Warburg Pincus LLC, TPG Capital Management and Lockheed Martin. The negotiations collapsed.
It was also previously reported that Cerberus Capital Management was previously considering the idea of acquiring Computer Sciences.
Market observers noted that selling the government services business of Computer Sciences has been a challenge since it is the most valuable unit of the company. One of the sources emphasized that the business unit is currently more standalone.
Larry Prior is the head of the business unit. He is known for having a strong deal-maker. Prior joined Computer Sciences in lead the company’s defense and intelligence unit in the middle of 2013. He serves as vice president and general manager of NPS.
Jana Partners, the activist hedge fund headed by Barry Rosenstein acquired 8,371,757 shares (including options to buy 3,875,600 shares) or 5.9% stake in Computer Sciences based on its 13D filing with the Securities and Exchange Commission (SEC) dated February 11.
The activist hedge fund indicated in the filing that the aggregate purchase price of its stake in Computer Sciences was approximately $321.9 million. Jana Partners made the investment because of its belief that the shares of the company” are “undervalued and represent an attractive investment opportunity.”
Jana Partners said engaged in discussions and will continue to do so with the board and management of the company regarding potential strategic alternatives, capitalization, capital allocation and other issues. The activist hedge fund also stated its intention to take other steps to increase shareholder value and to pursue other plans or proposals.