CSC to acquire UXC for $428 million

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CSC to acquire UXC for $428 million

Multinational solutions provider CSC has announced its intent to acquire Australia's UXC Limited in a $428 million deal.

In response to CSC's proposal to pay $1.28 per share, UXC Limited announced that a five-week due diligence period would start. The transaction will complete in February if due diligence, shareholder, regulatory and legal approvals are attained on schedule.

"The proposal from CSC recognises the potential of UXC and is a testament to the strong business we have built. The board of UXC is supportive of this move," said UXC managing director Cris Nicolli.

UXC Limited reported revenues of $686 million for the 2015 financial year, with almost 3000 staff on its books. CSC Australia raked in $724 million in sales for the year ending 31 March, with more than 2100 local employees.

"A combined CSC-UXC would be among the region's largest IT services companies, based on revenues," Nicolli said. "This combination will provide an expanded set of services for customers as well as a broader industry reach."

Despite the similarity in revenue, UXC Limited and CSC Australia have been on opposite journeys in recent times. CSC Australia's sales fell by $127 million this year while UXC Limited saw a $43 million improvement.

UXC won a global Microsoft partner award and two Australian awards this year. The company has even succeeded in CSC's backyard, boasting of $68 million revenue and 200 employees at its the North American branch on the back of a series of retail customer wins.

In its announcement, UXC Limited claimed to be the "largest of the ASX-listed services and integration companies", even though public company Data#3's revenue of $870.5 million this year is almost $200 million higher.

"All of us at UXC are tremendously proud of what we’ve achieved to date, and the proposal from CSC represents a potential next stage in the evolution of our company," said Nicolli.

Meanwhile, CSC has struggled in its transition to the cloud, with global chief executive Mike Lawrie admitting in May that he "missed some of the dynamics associated with the acceleration to cloud".

CSC has been the subject of acquisition speculation since September, with Hewlett-Packard reportedly almost taking on the IT services giant at a market value of US$9.6 billion. In March, reports surfaced of CSC staff morale hitting an "all-time low", according to employer review site Glassdoor.

Locally the company has also been in the headlines for the wrong reasons, with cloud management subsidiary ServiceMesh accused of paying $2 million in bribes to Commonwealth Bank staff. The episode resulted in CSC executive Eric Pulier resigning in April days before he was due to be fired, with CSC subsequently suing him for fraud.

CSC Australia did have a recruitment win in July, luring renowned technology veteran Sam Johnston back from Europe to fill its ANZ chief technology officer vacancy. The local arm also announced a $13 million mainframe services deal with the Australian Electoral Commission back in September.

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