Report: CSC Knocks On Private Equity Doors, Weighs Leveraged Buyout

Computer Sciences Corporation (CSC) has been exploring its options for a leveraged buyout with multiple private equity firms, including Blackstone Group and Bain Capital, Bloomberg report ed Monday.

The report, citing "people with knowledge of the matter," said the talks are still in their early stages and center around CEO Mike Lawrie's turnaround push since taking the helm in 2012.

Such a deal would be the largest leveraged buyout since Dell went private for $16 billion last year. CSC is No. 4 on CRN's SP500 list, with $13 billion in annual revenue for the 12 months ended July 4.

[Related: CSC: We're Taking The Brakes Off Of Our Business]

CSC shares jumped as much as 5.3 percent Monday on the news and continued their climb Tuesday, closing up about 3 percent to a recent market value of $8.87 billion.

The company declined comment on the report, saying they "do not comment on market rumors."

CSC itself is not new to takeover rumors, with multiple reports over the years that companies such as HP and private equity players including Blackstone, Warburg Pincus and TPG Capital Management were looking into a possible acquisition or leveraged buyout.

CSC in recent years has been focused on a turnaround in what CTO Dan Hushon called a "make-it-or-break-it moment" in a February interview. Bloomberg reported that CEO Lawrie has been pitching CSC to potential suitors as a company halfway through its turnaround push.

"We're going to push it really hard ... I call it a Janis Joplin moment, when you've got nothing left to lose. And I really think that that statement of having nothing left to lose is really fitting here," Hushon said in the February interview. "If we're really all in the boat around bringing innovation forward to our customers, and we pull the airbrakes off all of the work we've been doing before."

Martin Wolf, president of Walnut Creek, Calif.-based channel investment advisory Martin Wolf M&A Advisors, said private equity deals are becoming more common nowadays, pointing to recent deals with Tibco Software for $4.3 billion and Compuware for $2.5 billion. He said the idea of a leveraged buyout was compelling, especially with the success Bain Capital in particular has seen with EMC and others.

"I think that it is a very interesting idea ... [CSC] I think would do well as a private company because it needs to be transformed ... I think it's very sound," Wolf said.

He pointed to the transition to cloud and Software-as-a-Service environments as the driver behind many of these deals. As CSC looks to make that transition, he said that it would be "perfectly logical" for them to seek out a leveraged buyout.

"I think their competition are in many cases larger, more nimble, with richer valuations. I think it’s a chance to reset the company. I think it’s a good thing. They're not the only ones that are changing the business as a result of cloud and Software-as-a-Service. I think it’s a good idea," Wolf said.

PUBLISHED SEPT. 30, 2014