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CSC beefs up public sector biz with $390m merger deal

Okays SRA soiree – whatever will be will be

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Soon-to-be split CSC is merging its government services biz with US public sector IT outfit SRA for $390m (£254m).

The acquisition will add around $1.4bn (£911m) in revenue and 5,000 staff to CSC's public-sector outfit, creating combined annual sales of $5.5bn (£3.6bn) and a workforce of nearly 19,000 employees.

Mike Lawrie, CSC’s chief exec, said: “The combination of CSGov and SRA is an important strategic move to best position the combined company as the government IT services industry consolidates."

Anthony Miller, analyst at TechMarketView, said the deal fits CSC's ultimate plan to hive off its commercial and public-sector operations:

It was clear from day one that as soon as Mike Lawrie was appointed to lead the organisation, this would be his ultimate game plan. When the split was announced a few months ago, it was clear to everybody that CSC was unlikely to remain in its current form.

He is dealing with the public sector business, and this may not be the last acquisition on that side of the house.

Under the deal, SRA shareholders will retain a 15 per cent stake in the biz, with Lawrie chairing the board.

Miller said an announcement as to who might acquire its commercial arm will be expected by the end of the year. He cited Indian outsourcer TCS and Canadian giant CGI as possible fits.

The company has been undergoing a major cost-cutting exercise to get it in shape for potential buyers, slashing costs and expenses by nearly half a billion dollars.

Almost 800 employees were put at risk of redundancy in May, with their roles earmarked to be sent to near or off-shore locations.

In its last quarter results, operating profit crept up to $228m, from $214m. However, revenue plunged by 14.7 per cent to $2.76bn (£1.8bn).

The transaction with SRA is expected to be complete by November 2015. ®

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