IBM UK Ltd has forestalled the planned London flotation of Data Sciences Plc by making a #95m cash offer for the defense and general software and systems integration company that CINven Ltd, could not refuse. CINven, the former venture capital arm of the Coal Board Pension Fund did a management buyout from British Coal late last year and is now independent although still working predominantly for the pension funds of state and former state undertakings. (Previously, CINVen’s Chief executive Andy Roberts was poached from ICL Plc and engineered a turnaround in fortunes in 1991.) CINVen financed the buyout of Data Sciences from Thorn EMI Plc and still owns about 75%, so it did not much matter what anyone else thought about selling to IBM rather than floating once CINVen had accepted. The pathfinder prospectus was issued only a week ago (CI No 2,859). We had a number of approaches from trade buyers, Data Sciences chief executive said. The IBM offer is just a very compelling offer. The acquisition is in line with IBM UK’s commitment to double its services business to #1,000m over the next four years. IBM will also take on Data Sciences’ debt, which was #3.9m at the end of September. The money also includes about #2.5m of costs from the aborted flotation. From IBM’s point of view, these opportunities come up once in a Big Blue moon. This acquisition is the largest IBM UK has ever made, and second only to the acquisition of CGI Informatique SA in terms of European takeovers. And the French one was back in 1993. IBM has been unusually quick out of the blocks in snapping up Data Sciences, and had been looking around for some time. CMG Plc, which successfully floated last November with very little effort, was another target of IBM. It floated at 290 pence and is today trading at 465 pence.
Data Sciences made operating profits of #6.1m on turnover of #106m in the year to last September. IBM has irrecovable acceptance from 89% of the ordinary shares and 90% of the preference shares. The staff will receive a similar package, including a #100 free share offer, and a cash payout from the employee trust scheme. There will be no job losses among the 1,700 staff although gossips say that many of Data Sciences’ highly talented and valuable professionals are under-employed just now. Data Sciences operates in the areas of defense, aerospace, finance, commercial and telecommunications, mainly in the UK, but with 26% of turnover coming from the Netherlands with a small German presence. IBM was thought to be scaling back its defense activities, and it is true that defense is falling as a percentage of Data Sciences’ business – it puts it at about 20% presently, but it was part of the whole irresistible package. With IBM as the best piranha in town as Roberts put it, there were a whole pile of exhausted piranhas after a week of intense haggling. IBM already knew the company prior to the proposed flotation presenting the opportunity to snap it up because Data Sciences is a subcontractor on IBM’s #450m logistics contract with the Royal Air Force. Based in Farnborough, Hampshire, Data Sciences is the combination of the old Software Sciences software and services company with the Datasolve services bureau, companies that were brought together by Thorn EMI Plc.
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