Ca Turns Hostile On Computer Sciences
Computer Associates, of the US, on Tuesday launched a $9.8 billionn hostile cash bid for California-based Computer Sciences Corporation, the computer services group. The move followed the failure of CAs efforts to persuade CSC to agree to a negotiated merger. CA, one of the worlds largest software companies, initiated its efforts to acquire CSC last week.
Over the weekend it set a Monday noon deadline for the beginning of substantive negotiations, but CSC did not comply. On Tuesday, CA said it had started a tender offer of $108 a share, the same figure it put forward last week. The total value of the bid also included about $700 million in debt. The tender offer was scheduled to expire on March 16.
If completed, the CSC takeover would be by far the largest of more than 60 acquisitions undertaken by CA since the software group was formed in 1976. It is also the first time that CA has launched a hostile bid. Industry analysts said CA might still be gambling that it could force CSC to negotiate.
However, there was also widespread speculation that CSC might seek an alternative white knight merger partner, although the size of the deal meant there were few viable candidates. IBM, EDS, AT&T and Hewlett-Packard have been mentioned as possible merger partners, although none has an obvious interest in combining with CSC.
CA, which views the acquisition of CSC as a way to broaden its involvement in the corporate computing market, had continued efforts to engage CSC in negotiations over the weekend, but was rebuffed, the software group said. CSC, which is being advised by Goldman Sachs, refused to consider a sweetened bid of $114 a share if the company would agree to a negotiated merger.
On Tuesday, in a filing with the Securities and Exchange Commission, CA said it was taking steps to invalidate CSCs poison pill defence. The so-called shareholders rights plan was inapplicable under laws of the state of Nevada, where CSC is incorporated, CA said. CA, which is advised by Bear Stearns, also said it would take appropriate steps to force CSCs board to permit the companys shareholders to vote on the offer. CSC has yet to respond to the CA bid.
CSC shares were trading at $107 3 /8 early yesterday, unchanged from Fridays close (US markets were closed for Presidents Day on Monday). CA was trading at $46 3 /4, down from $48 3 /8. Copyright Financial Times Limited 1998. All Rights Reserved.