Strategic Combination of Two Complementary
Businesses Will Create Greater Value for Clients, Partners and
Shareholders, Growth Opportunities for Employees
- CSC and the Enterprise Services segment
of Hewlett Packard Enterprise (HPE) to create leading pure-play
global IT services company, uniquely positioned to lead clients on
their digital transformations;
- New company expected to have annual
revenues of $26 billion and more than 5,000 clients in 70
countries, covering every major global region;
- Combined company expected to produce
first-year synergies of approximately $1 billion post-close, with a
run rate of $1.5 billion by the end of year one;
- CSC and HPE shareholders each will own
approximately 50 percent of shares in the new company;
- Agreements between HPE and the new
company to ensure ongoing beneficial relationship; and
- Mike Lawrie to become chairman,
president and CEO of combined company; Meg Whitman to join the new
company’s board; board appointments will be split equally between
nominees of HPE and CSC.
CSC (NYSE: CSC) today announced that its Board of Directors has
unanimously approved a plan to merge the company with the
Enterprise Services segment of Hewlett Packard Enterprise
(HPE).
The strategic combination of the two complementary businesses
will create one of the world’s largest pure-play IT services
companies, uniquely positioned to lead clients on their digital
transformations. The new company is expected to have annual
revenues of $26 billion and more than 5,000 clients in 70
countries.
The merger is expected to be completed by the end of March 2017,
subject to shareholder and regulatory reviews and approvals.
Following the transaction, CSC and HPE shareholders each will own
approximately 50 percent of the new company’s shares. The
transaction is intended to be tax-free to CSC and HPE and their
respective shareholders for federal income tax purposes.
Today’s announcement comes six months after CSC separated into
two publicly traded companies: CSC, to serve commercial and
government clients globally, and CSRA, which serves public sector
clients in the United States. Both CSC and HPE’s Enterprise
Services segments have been on upward trajectories, showing
significant improvements in financial performance and client
satisfaction scores.
Following completion of the transaction, Mike Lawrie, who
currently serves as chairman, president and CEO of CSC, will become
chairman, president and CEO of the new company. Meg Whitman, HPE’s
president and CEO, will join the new company’s Board of Directors,
which will be split equally between nominees of CSC and HPE. CSC’s
current CFO, Paul Saleh, will continue in that role after the
transaction closes. Mike Nefkens, the current EVP and GM of HPE
Enterprise Services, will report to Lawrie and will become a key
part of the new company’s executive team. Other executives and
directors, as well as the name of the company, will be announced at
a later date.
“Our proposed merger with HPE Enterprise Services is a logical
next step in CSC’s transformation,” Lawrie said. “As a more
powerful and versatile global technology services business, the new
company will be well positioned to innovate, compete and serve
clients in a rapidly changing marketplace. We are excited by the
great potential this merger brings to our people, clients, partners
and investors, and by the opportunity to strengthen our
relationship and collaboration with HPE.”
“The ‘spin-merger’ of HPE Enterprise Services with CSC is the
right next step for HPE and our customers,” said Whitman.
“Enterprise Services’ customers will benefit from a stronger, more
versatile services business, better able to innovate and adapt to
an ever-changing technology landscape. As two companies with global
scale, strong balance sheets and a focus on innovation, both HPE
and the new company will be well positioned as leaders in their
respective markets.”
Creating a Global IT Services Leader
The combination of CSC and HPE’s Enterprise Services segment
will create a new company with substantial scale to serve clients
more efficiently and effectively worldwide. By combining, both
companies can more rapidly accelerate their already-improved
financial and operational performance.
For clients, the new company will offer enhanced global access
to world-class, next-generation offerings – combined with deep
industry experience in key industry sectors.
The merging of these businesses will offer:
- World-class strength in customer
service and IT operations – among the safest pair of hands in
the industry, deploying a broader set of resources and expertise to
benefit clients;
- Market-leading industry and
technology expertise – industry leading experience and IP in
areas such as financial services, healthcare and life sciences,
transportation, consumer products, and insurance, helping customers
transform faster;
- Global scale – operating 85
delivery centers and 95 data centers across 70 countries, providing
access to the most efficient IT services in the world;
- Technology independence and
best-in-class capabilities in next-generation cloud, security,
application development and modernization, big data and analytics,
mobility, workplace, and sophisticated business process and IT
services;
- Combined leadership bringing
deep turnaround experience and transformation capabilities,
customer relationships, sales/GTM, industry and functional
expertise;
- Expanded best-of-breed technology
partnerships that provide greater choice of solutions; and
- Enhanced innovation, R&D, and
investment opportunities for new services and solutions.
CSC’s Go-Forward Strategy Post-Separation
Today’s announcement represents a major step in the
post-separation strategy outlined by CSC’s leadership last fall. At
that time, the company positioned itself as a next-generation IT
services company built specifically to respond to a changing market
– one that is driving clients to move rapidly toward digital
transformation.
In just the six months since separation, CSC has taken decisive
steps to equip the company to take clients on this digital journey,
positioning itself as a true next-generation leader in the markets,
industries and practice areas it serves. CSC has:
- Stood up vertically integrated
businesses in healthcare and insurance to take full advantage of
its IP and existing market leadership;
- Created CeleritiFinTech, a joint
venture with HCL, to do the same in banking;
- Acquired UXC, making CSC one of the
largest IT services companies in the Australia-New Zealand
region;
- Acquired Xchanging Plc, a UK-based
provider of insurance software and business process services,
creating the number one provider of core insurance solutions
globally; and
- Acquired Fixnetix and Fruition Partners
to bolster its leadership in banking and capital markets and
service management, respectively. Together, Fruition and UXC make
CSC the world leader in service management solutions. Yesterday,
the company also announced its acquisition of Aspediens, Europe’s
leading provider of technology-enabled solutions for the
service-management sector.
“Clients are feeling the pressure to digitally transform their
enterprises to meet new business demands and customer
expectations,” Lawrie noted. “They need a partner with the
innovation, scale, leadership and dependability to answer the
challenge.
“As a pure play, the combined company will be built to lead
digital transformations using next-generation technology solutions
from both companies,” Lawrie continued. “It will be able to operate
independent of any single hardware provider, while partnering with
the world’s leading technology providers, including HPE.”
About the Transaction
The transaction between CSC and HPE is expected to deliver
approximately $8.5 billion to HPE’s shareholders on an after-tax
basis. This includes an equity stake in the newly combined company
valued at more than $4.5 billion, a cash dividend of $1.5 billion,
and the assumption of $2.5 billion of debt and other liabilities
related to the HPE Enterprise Services segment.
The merger of the two businesses is expected to produce
first-year synergies of approximately $1 billion post-close, with a
run rate of $1.5 billion by the end of year one. There is an
opportunity for additional synergies in subsequent years. As owners
of approximately 50 percent of the merged company, HPE shareholders
will share in the value of the synergies, as well as future growth
in earnings.
RBC Capital Markets is serving as financial advisor to CSC, and
Allen & Overy LLP is serving as legal advisor.
For More Information
For more insights into today’s announcement, watch
this video message from Mike Lawrie and Meg Whitman.
Download the infographic for additional
information.
HPE Investment Community Conference Call
HPE will extend its conference call to discuss its fiscal second
quarter financial results today and to elaborate on the
transaction; the call will start at 4:30 p.m. Eastern Daylight Time
(EDT). Mike Lawrie, CSC chairman, president and CEO, will
participate in the call to discuss this transaction along with HPE
management. For webcast details, go to www.investors.hpe.com.
CSC Fourth Quarter 2016 Results Analyst Call Rescheduled for
5:30 p.m. EDT Today
The CSC senior management conference call and webcast,
originally scheduled for 5 p.m. EDT today, will now begin at 5:30
p.m. EDT. The dial-in number for domestic callers is 888-244-2416.
Callers who reside outside of the United States or Canada should
dial 913-312-1384. The passcode for all participants is 3124172.
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
31, 2016. 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 3124172. A
replay of this webcast will also be available on CSC’s website.
CSC will release financial results for the fourth quarter and
fiscal year 2016 today at approximately 4:30 p.m. EDT.
About CSC
CSC (NYSE: CSC) leads clients on their digital transformation
journeys. The company provides innovative next-generation
technology services and solutions that leverage deep industry
expertise, global scale, technology independence and an extensive
partner community. CSC serves leading commercial and international
public sector organizations throughout the world. CSC is a Fortune
500 company and ranked among the best corporate citizens. For more
information, visit the company's website at www.csc.com.
About HPE
HPE is an industry-leading technology company that enables
customers to go further, faster. With the industry’s most
comprehensive portfolio, spanning the cloud to the data center to
workplace applications, our technology and services help customers
around the world make IT more efficient, more productive and more
secure.
Additional Information and Where to Find It
In connection with the proposed transaction, Everett SpinCo,
Inc., a wholly-owned subsidiary of Hewlett Packard Enterprise
created for the transaction (“Spinco”), will file with the SEC a
registration statement on Form S-4/S-1 containing a prospectus and
CSC will file with the SEC a proxy statement on Schedule 14A and a
registration statement on Form S-4 containing a prospectus.
INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE REGISTRATION
STATEMENTS/PROSPECTUSES AND PROXY STATEMENT WHEN THEY BECOME
AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE PARTIES AND THE PROPOSED TRANSACTION. Investors and security
holders may obtain a free copy of the prospectuses and proxy
statement (when available) and other documents filed with the SEC
by CSC, Hewlett Packard Enterprise and Spinco at the SEC’s web site
at http://www.sec.gov. Free copies of these documents, once
available, and each of the companies’ other filings with the SEC,
may also be obtained from CSC’s web site at www.csc.com.
This communication is not a solicitation of a proxy from any
investor or security holder. However, CSC, Hewlett Packard
Enterprise, and certain of their respective directors, executive
officers and other members of management and employees, may be
deemed to be participants in the solicitation of proxies from
stockholders of CSC in respect of the proposed transaction under
the rules of the SEC. Information regarding CSC’s directors and
executive officers is available in CSCs 2015 Annual Report on Form
10-K filed with the SEC on June 8, 2015, and in its definitive
proxy statement for its annual meeting of stockholders filed on
June 26, 2015. Information regarding Hewlett Packard Enterprise’s
directors and executive officers is available in Hewlett Packard
Enterprise’s 2015 Annual Report on Form 10-K filed with the SEC on
December 17, 2015, and in its definitive proxy statement for its
annual meeting of stockholders filed on February 12, 2016. These
documents as well as other documents filed by CSC, Hewlett Packard
Enterprise or Spinco with the SEC can be obtained free of charge
from the sources indicated above. Other information regarding the
participants in the proxy solicitation and a description of their
direct and indirect interests, by security holdings or otherwise,
will be contained in the registration statements, prospectuses and
proxy statement and other relevant materials to be filed with the
SEC when they become available.
This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
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.” 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. Many factors could
cause actual results to differ materially from such forward-looking
statements with respect to the transaction announced above
including risks relating to the completion of the transaction on
anticipated timing, including obtaining shareholder and regulatory
approvals, anticipated tax treatment, unforeseen liabilities,
future capital expenditures, inability to achieve expected
synergies, loss of revenues, delay or business disruption caused by
difficulties in integrating the businesses of CSC and Enterprise
Services . For a written description of risk factors that could
cause actual result in CSC’s business to differ materially from
forward looking statements regarding those matters, see the section
titled “Risk Factors” in CSC’s Form 10-K for the fiscal year ended
April 3, 2015 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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Analysts:Neil DeSilva, +1-703-641-3000neildesilva@csc.comorIndustry
Analysts:Michaela Lowe, +1-703-459-7269mlowe22@csc.com
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