CSC Announces Plan to Separate into Two Independent, Publicly Traded Companies
May 19 2015 - 4:16PM
Business Wire
$10.50 Special Cash Dividend Per Share
Intended as Part of Transaction
Move Sharpens Strategic Focus for Global
Commercial and U.S. Public Sector Businesses; Drives
Additional Value for Customers and Shareholders
Computer Sciences Corporation (NYSE: CSC) today announced that
its Board of Directors has unanimously approved a plan to separate
the company into two publicly traded, pure-play leaders: one to
serve commercial and government clients globally and one to serve
public sector clients in the U.S.
Concurrent with the separation, CSC intends to pay a special
cash dividend to shareholders of $10.50 per share at closing, which
is expected by October 2015.
“CSC began its turnaround three years go,” said CEO Mike Lawrie.
“That turnaround has progressed strongly, and our focus now turns
to positioning the business for long-term growth and leadership.
The best way to accelerate that transformation is by separating the
company into two businesses, each uniquely positioned to lead its
market by focusing strongly on the needs of its clients.”
About the Companies
Both businesses will be industry leaders from day one.
- CSC – Global Commercial will
move forward as the trusted information technology (IT) services
and solutions partner for Fortune 1,000 companies and non-U.S.
government clients, leveraging its industry, infrastructure and
consulting expertise to lead customers on their digital
transformation journey. With $8.1 billion in FY 15 revenue, CSC
Global Commercial will have more than 1,000 customers (including
175 of the Fortune 500), 51,000 employees and 34 delivery centers
globally. The business will retain its leadership status across
multiple markets, along with innovative offerings and
industry-leading strategic partnerships.
- CSC – U.S. Public Sector will be
a top three provider of mission-specific IT, infrastructure and
business services to U.S. federal, state and defense agencies.
Building on more than a half-century of government service, the
business also will be a leading IT services provider to national
security. The public sector business had FY 15 revenues of $4.1
billion and employs 14,000 people, including 3,500 U.S. military
veterans.
Rationale for the Separation
CSC’s Board of Directors made the decision to separate the
commercial and public sector businesses as a result of several
factors.
- The “Get Fit” phase of the company’s
turnaround has been successfully completed. Over the last three
years, CSC has implemented a common operating model, streamlined
its cost structure, improved its go-to-market performance and
brought in proven leadership.
- At the same time, markets have evolved
rapidly, with diverging opportunities and challenges. On the
commercial side, clients seek partners with a deep understanding of
their business who can help lead their digital transformations. In
the U.S. public sector, technology demands are increasing, and
clients want providers with specific experience in
government-focused innovation. By separating, each business will
have the scale – among the largest in their respective categories –
as well as the focus to meet unique customer needs and market
requirements.
- The two segments have different growth
profiles and cash flow dynamics. The separation will allow both
companies to better optimize their capital strategies and cost
structures, and will provide investors with distinct long-term
investment opportunities.
- The market for talent has become highly
competitive. As two independent, focused and market-leading
organizations, each business will be better positioned to recruit
and retain the best IT talent.
Based on these factors, CSC’s Board of Directors believes that
the next phase of the turnaround, focused on growth, will be
enhanced by the ability of the two businesses to function as pure
plays focused exclusively on their respective customer
segments.
“Our analysis shows significant benefits of going with a
pure-play strategy,” Lawrie noted. “We expect this change to enable
both businesses to enhance innovation and improve delivery, in ways
that are consistent with the rate and pace of the markets they
serve.”
Moving Forward
CSC will operate on a “business as usual” basis while details of
the separation – including leadership, locations and other details
– are being finalized. When the separation is concluded, it is
expected that both businesses will have:
- Operational and financial scale;
- Adequate capital, consistent with
investment-grade credit profiles; and
- Industry-leading partnerships – built
on CSC’s existing partner ecosystem – that have proven instrumental
in the company’s recent success.
“During the first three years of CSC’s turnaround, we benefitted
from taking a unified approach,” Lawrie concluded. “The progress
we’ve made, coupled with the changing demands of the market, make
this a good time to give these two businesses room to thrive as
independent companies, able to move decisively to capture the
opportunities in front of them.”
About the Transaction
The separation is intended to qualify as a tax-free transaction
to CSC shareholders. Immediately following the separation, which is
expected to be completed by the end of October 2015, CSC
shareholders will own shares of both CSC – Global Commercial and
CSC – U.S. Public Sector.
Completion of the separation will not require a shareholder vote
but will be subject to customary conditions, including final
approval of the CSC Board of Directors, the receipt of a favorable
opinion from counsel with respect to the tax-free nature of the
transaction, and the effectiveness of a Form 10 filing with the
U.S. Securities and Exchange Commission.
RBC Capital Markets is serving as financial advisor to CSC.
Additional financial advice is provided to CSC by Guggenheim
Partners. Allen & Overy LLP is serving as legal advisor.
Investor Call/Webcast
CSC senior management will discuss this announcement and other
related matters at 5 p.m. EDT today during the company’s previously
scheduled fourth quarter earnings call and webcast. The dial-in
number for domestic callers is 888-542-1101. Callers who reside
outside of the United States or Canada should dial 719-325-2482.
The passcode for all participants is 9825381. The webcast audio and
any presentation slides will be available on CSC’s Investor
Relations website.
A replay of the conference call will be available from
approximately two hours after the conclusion of the call until May
26, 2015. The replay dial-in number is 888-203-1112 for domestic
callers and 719-457-0820 for callers who reside outside of the
United States and Canada. The replay passcode is also 9825381. A
replay of this webcast also will be available on CSC’s website.
About CSC
Computer Sciences Corporation (CSC) is a global leader of next
generation information technology (IT) services and solutions. The
Company's mission is to enable superior returns on our clients’
technology investments through best-in-class industry solutions,
domain expertise and global scale. CSC has approximately 70,000
employees and reported revenue of $12.2 billion for the 12 months
ended April 3, 2015. For more information, visit the company's
website at www.csc.com.
All statements in this press release and in all future press
releases that do not directly and exclusively relate to historical
facts constitute “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995. These
statements represent the Company’s intentions, plans, expectations
and beliefs, and are subject to risks, uncertainties and other
factors, many of which are outside the Company’s control. These
factors could cause actual results to differ materially from such
forward-looking statements. For a written description of these
factors, see the section titled “Risk Factors” in CSC’s Form 10-K
for the fiscal year ended March 28, 2014 and any updating
information in subsequent SEC filings. The Company disclaims any
intention or obligation to update these forward-looking statements
whether as a result of subsequent event or otherwise, except as
required by law.
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