Computer Sciences to Buy Continuum for Almost $1.5 Billion
AUSTIN, Texas (AP) _ Computer Sciences Corp. extended its push into management of corporate computer systems Monday with a nearly $1.5 billion deal to buy The Continuum Company Inc., a specialist in insurance and banking software.
It gives CSC a boost in competing with the two largest providers of computer services _ IBM’s Integrated Systems Solutions Corp. and Electronic Data Systems Corp.
All three firms grew from designing and running data centers for government agencies. But ISSC and EDS years ago became much more diverse.
``It’s no longer good enough just to have excellent capabilities to manage technology,″ said Chris Leuchtenburg, analyst at Forrester Research in Cambridge, Mass. ``You need to bring to that in-depth understanding of your consumers’ business.″
Though CSC’s entry into commercial data work has been more recent, the company has scored some large contracts. For instance, Hughes Aircraft Co. in January hired CSC to run its data centers for eight years in a $1.5 billion deal.
The company offered a nearly 40 percent premium over Continuum’s market value, which sent investors scrambling Monday. Continuum shares closed up $12.25 to $57.62 1/2, a 27 percent gain on the New York Stock Exchange. Computer Sciences stock fell $2.75 to $75.37 1/2, also on NYSE.
CSC will pay 0.79 of its shares for each of Continuum’s 23.9 million shares. Based on CSC’s closing stock price Friday of $78.12 1/2, a Continuum shareholder would receive the equivalent of $61.70 per share and the overall deal would be worth $1.47 billion.
Leuchtenburg called the purchase price surprising, but added that it shows CSC’s confidence in its product.
Continuum will retain its name and Austin headquarters as it becomes a subsidiary of El Segundo, Calif.-based CSC. The transaction requires approval from shareholders and regulators. DST Systems Inc., which owns about 23 percent of Continuum, has said it will support the deal.
``The addition of Continuum will greatly enhance our increasing focus on the financial services marketplace,″ Van Honeycutt, CSC president and chief executive officer, said in a statement. ``Continuum catapults us into a strong position in financial services and continues the shift of our business toward the commercial sector.″
Continuum had revenue last year of about $500 million. CSC had revenue of just over $4 billion.