Computer Sciences Corp. on Tuesday said it has decided to “explore strategic alternatives,” including a sale of the company, and that it is implementing a restructuring program that will cut about 5,000 jobs over two years.
Shares of the El Segundo-based provider of information technology services rose 4.4 percent to settle at $59.80 in heavy trading on Tuesday after briefly touching $60.39, which beat its 52-week closing high of $59.90.
The Wall Street Journal went one step further than Computer Sciences’ announcement, reporting the company is already in talks with suitors that could lead to a potential sale valuing Computer Sciences at more than $10.6 billion. The Journal did not disclose who the suitors were.
Computer Sciences said in a statement on Tuesday that its board decided to explore the company’s options for improving shareholder value in response to recent expressions of interest. The company has hired investment bank Goldman Sachs & Co. as its adviser. Computer Sciences said there can be no assurance the move will result in a transaction.
Computer Sciences had recently been a takeover target, months before it officially said it was mulling a company sale. In January, a potential deal for private equity firm Blackstone Group and computer maker Hewlett-Packard Co. to acquire the company fizzled, according to reports. The effort was said to be the second time in three months that takeover talks for the company failed.
In January, reports surfaced that potential buyers, including Lockheed Martin Corp. and three private equity firms, had ended talks to buy Computer Sciences after they couldn’t agree on how to structure a deal. Computer Sciences was reported to have wanted to sell itself in one piece to Lockheed, which then would keep the company’s defense-contracting business and sell the rest to Warburg Pincus, Texas Pacific Group and Blackstone Group. Lockheed wanted to break Computer Sciences into two pieces.
Computer Sciences also said on Tuesday that it was moving forward with a restructuring program that it expects will significantly improve future cash flow and earnings. The program will trim approximately 4,300 jobs in fiscal 2007 and an additional 700 jobs in fiscal 2008 from its global work force of about 80,000. The cuts, a majority of which will be in Europe, are part of an effort to deal with “excess capacity in certain geographies,” Computer Sciences said.
Excluding pre-tax restructuring charges of approximately $345 million in fiscal 2007 and about $30 million in fiscal 2008, the company expects the restructuring plan to result in pre-tax savings of around $150 million in fiscal 2007 and approximately $300 million in fiscal 2008.
