Covansys buy to boost CSC size

Computer Sciences Corporation (CSC) will acquire Covansys for $1.3 billion (around Rs 5,350 crore). Both have entered into an agreement, according to an announcement.

The all-cash transaction will nearly double the size of CSC workforce in India to around 14,000. Covansys India has approximately 6,400 employees in locations including Bangalore, Chennai, Vadodara and Mumbai. The company's Indian operations began in 1991 and it now occupies 550,000 square feet, aggregating one of the largest offshore facilities among the US-based consulting and technology services firms.

"With this deal, we have significantly accelerated our India offshore business plan with the addition of a US and international direct sales force," said CSC President and Chief Operating Officer Mike Laphen in a press statement. "The CSC-Covansys combination reinforces our commitment to continue to build a strong offshore platform, and offers a broad range of capabilities to our clients that can be serviced directly from India or through our existing businesses."

"We believe this is an outstanding transaction for our shareholders, clients and employees," said Raj Vattikuti, President and CEO of Covansys. Covansys posted revenues of $455.5 million for the 12 months ended December 31, 2006. It has nearly 9,000 employees worldwide. The transaction, expected to be earnings per share (EPS) neutral to CSC during the first 12 months, is expected to be completed during the second quarter of CSC's fiscal year 2008. "The acquisition furthers CSC's strategic goals of increasing shareholder value and growing our business both organically and by acquisition," said CSC Chairman and Chief Executive Officer Van B. Honeycutt.

"With this action, we are significantly strengthening our capabilities and presence in India as well as creating an additional market channel for our industry, consulting and outsourcing solutions," he added.

The agreement requires approval by the holders of a majority of the outstanding Covansys shares and is subject to customary conditions, including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.