The buyback decision brings the company’s consideration of strategic alternatives to boost shareholder value, including a possible sale, to a close.
CSC will use an accelerated share repurchase scheme for $1bn of the buyback. This includes an initial $500m purchase of share held by Goldman Sachs & Co, followed by a second purchase of the same number of shares from Goldman nine to 12 months later, at an average weighted price for that period.
Once these transactions close, CSC will use the remaining $1bn or so to buyback shares on the open market over a period of 12 months. All transactions will be financed by available cash, CSC said.
And in a busy news day for the company, CSC also announced $595m in previously unannounced federal contracts for its first fiscal quarter. The sum includes 80 contracts – 44 defense pacts totaling $349m and 36 civilian agency contract worth $246m overall.
On the state government level, CSC has extended its Medicaid contract with the state of New York to the tune of $276m dollars over three years. The Medicaid outsourcing business – developing and managing a state’s information system for claims processing and reporting – is one for which CSC has mostly remained on the sidelines. Fellow services firm EDS Corp runs the show on most of these contracts, with ACS Inc and Unisys Corp each picking up some Medicaid work as well.
But the New York state contract is a substantial one as far as these deals go. Under the contract, CSC will continue to manage the system it designed and implemented under contract warded in 2000. CSC will handle eligibility verification, claims processing, Web site duties, data center and network services, and call center management.
