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March 28, 2005

SunGard takes the long view with $11.3bn buyout

SunGard Data Systems said yesterday it intends to be acquired and taken private by a group of private investors in a deal which, valued at $11.3bn, would represent the largest ever such buyout of a technology company.

By CBR Staff Writer

The deal, which will see the investors pay $36 cash for each SunGard share and adopt $500m in debt, will also see SunGard abandon its six-month-old plan to spin off its slower-growing Availability Services business.

Depending on regulatory and shareholder approvals, the latter expected in July, the deal is expected to close some time in the third quarter this year, chief executive Cristobal Conde said during a conference call.

He said the deal will give the company the opportunity to focus more on long-term opportunities, such as R&D investments, rather than concentrating on the short term concerns of the financial markets.

When you run a public company you’re always having to make tradeoffs between short-term EPS quarterly numbers and investing for long term, he said. As a private company will still have to make those tradeoffs, but we will be able to favor the long term.

The company reported a flat fourth quarter 2004 profit last month, and said it expected low to mid single digit revenue growth across its two core businesses for 2005. For 2004, the company saw profit up 22.5% at $453.6m on revenue up 20.5% at $3.46bn.

SunGard offers business continuity and disaster recovery services, as well as processing transactions such as share trades for big financial services firms. It had hoped to invigorate its two units by selling off the Availability Services business.

Because of the tax rules we believe the investors want to hang onto SunGard as one piece for a very long time, Conde said. This deal is not predicated on breakups or cutting costs or lessening service levels for our customers.

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The acquisition is being led by Silver Lake Partners and includes Bain Capital, The Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co, Providence Equity Partners and Texas Pacific Group.

Conde said the investors have all the funding commitments they need to finance the deal. There is a $300m breakup fee.

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