CSC Wins 3-Way Battle To Buy London-Based IT Outsourcer
Solution provider Computer Sciences Corp. has won the bidding war for London-based IT outsourcing firm Xchanging, announcing Wednesday that the boards of both companies have agreed to an all-cash deal worth $720 million.
CSC -- No. 5 on CRN's 2015 Solution Provider 500 list -- raised its offer last month for Xchanging to $2.58 a share -- reportedly about $640 million -- as it battled with two other suitors. That came more than a month after Xchanging had agreed to be bought out by Capita plc, another U.K.-based outsourcing company, for $2.43 a share, or reportedly about $627 million.
CSC, based in Falls Church, Va., said the acquisition of Xchanging is expected to close in the next six months pending regulatory approvals.
A third suitor, private equity firm Apollo Global Management, of Purchase, N.Y., was also part of the battle for Xchanging. But according to published reports, Apollo withdrew from discussions in early November, ceding the field to CSC and Capita.
Xchanging also provides business processing and procurement services to clients in Europe, Australia and the United States. CSC especially noted Xchanging’s presence in the commercial insurance market.
’Xchanging’s capabilities and experience in the commercial insurance market would complement CSC’s global insurance presence in software, outsourcing and services,’ CSC President and CEO Mike Lawrie said in a statement.
The CSC statement also said the company sees opportunities to leverage Xchanging’s capabilities in other areas, such as wealth management outsourcing services, infrastructure and applications. CSC will also assess Xchanging’s other businesses to see how they might add value to CSC’s existing offerings and customer relationships, the statement added.
It has been a very active year for CSC, highlighted by last month’s split of its $8.1 billion commercial and $4.1 billion public sector businesses. The latter division merged with SRA and was renamed CSRA, creating the world's largest pure-play U.S. government security provider.
The commercial business, which retained the name CSC, is trying to reverse its sagging fortunes through a series of acquisitions. In October, it announced it would buy Australian IT services provider UXC Ltd. for about $300 million. That merger is expected to close in February. In August, it announced the purchase of London-based managed trading solutions provider Fixnetix, as well as Fruition Partners, a 300-person, cloud-based service management firm in Chicago.
CSC is an $8.1 billion business with 56,000 employees globally. In the fiscal quarter that ended Oct. 2, CSC's sales fell 7.2 percent, to $2.71 billion, after factoring for changes in foreign currency exchange rates.
In a filing Wednesday with the U.S. Securities and Exchange Commission on the accepted offer for Xchanging, CSC said it plans to expand Xchanging’s market reach by boosting CSC sales to Xchanging clients and building a services business around Xchanging’s Xuber insurance software platform. CSC also said it expects to generate ongoing annual cost savings in the range of about $75 million to $91 million within 12 to 18 months after the deal is completed.
Shares of CSC stock rose more than 1 percent in early trading Wednesday on the New York Stock Exchange, to nearly $31 per share. Stock in Xchanging advanced nearly 10 percent on the London exchange. The London exchange opened for trading not long after CSC’s announcement of the agreement between the two companies’ boards.
PUBLISHED DEC. 9, 2015