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Possible Bid to Buy CSC Said to Fizzle

January 21, 2006|From Reuters

A plan by private investment firm Blackstone Group and computer maker Hewlett-Packard Co. to acquire El Segundo-based Computer Sciences Corp. appears to have fizzled, according to people familiar with the matter.

Although New York-based Blackstone and Palo Alto-based Hewlett-Packard may revisit an offer, any takeover plan appears to be on ice for now, the sources said, marking the second time in three months that takeover talks for the information technology company have failed.

Shares of CSC fell $2.54, or nearly 5%, to $50.55 on Friday.

Officials from CSC, Blackstone and Hewlett-Packard declined to comment.

CSC was hoping to attract an offer of $65 a share, or about $12 billion, according to the Wall Street Journal, which was first to report the possible bid. CSC shares closed at $53.09 on Thursday, off a 52-week high of $59.90 reached in November.

A Hewlett-Packard deal for CSC would center on boosting HP's services division, which focuses on providing information technology for businesses.

In its fiscal fourth quarter ended Oct. 31, HP's services revenue grew 6% from a year earlier, to $3.9 billion, according to company filings.

"We expect [HP Chief Executive Mark] Hurd to be realistic about potential synergies and pitfalls and disciplined about deal valuation," Cindy Shaw, an analyst with Moors & Cabot, wrote in a research note Jan. 5.

An effort by Lockheed Martin Corp., Blackstone and two other equity firms to acquire CSC reportedly faltered in November.

The information technology outsourcing sector is increasingly appealing to private equity firms that are attracted to the industry's strong cash flow.

Affiliated Computer Services Inc., another IT outsourcing company, was pursued by private equity bidders late last year with a possible buyout price of around $8 billion. On Tuesday, the Dallas-based company said buyout discussions had ended.

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