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November 14, 2005

CSC takeover talks stall

The proposed takeover of IT and business process outsourcing giant Computer Sciences Corp by Lockheed Martin Corp and a group of private equity investors has stalled because of disagreements over how to structure the deal, according to a report.

By CBR Staff Writer

The Wall Street Journal claims that the Bethesda, Marylandbased company has agreed a price of $65 per share, valuing the company at around $12bn, a 23% premium on its share price at the end of last week. Lockheed only wants to buy CSC’s government business which makes up about a third of CSC’s $14.1bn in annual revenue, so private equity firms Warburg Pincus, Texas Pacific Group, and Blackstone Group are on hand buy up the rest. However, talks have stalled because CSC wants to sell its entire business to Lockheed, rather than have two transactions and deal with the private equity groups directly.

The paper points out that this leaves substantial risk with Lockheed, and it could be lumbered with parts of CSC it does not require if it is unable to subsequently close a deal with the investment groups.

Despite the hitch, shares in CSC increased by more than 4% in early trading yesterday, with investors more convinced that the parties are serious about a transaction.

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