DXC Will Pay $2 Billion For Swiss Firm Luxoft

DXC Technology plans to spend $2 billion in an all-cash transaction to acquire a Switzerland-based digital consultancy that does business on five continents, and has strong industry expertise in automotive, financial services, health care and science, the company announced today.

The deal for Luxoft -- a 19-year-old, 13,000-employee digital consultancy based in Zug, Switzerland that does business in 22 countries – is not expected to close until June, pending regulatory approvals, DXC CEO Mike Lawrie told investors during a conference call announcing the deal. Luxoft took in $911 million in revenue for the last four reporting quarters, the companies said in a press release.

Herndon, Va.-based DXC plans to buy all of the issued and outstanding company stock for a purchase price of $59 per share, which Lawrie said is about 48 percent higher than where it trades. DXC shares moved higher on Monday, up $0.05 to $57.37 in afternoon trading.

Lawrie said the two companies have been talking since last summer about a deal, but talks didn’t accelerate until the last two to three months.

“We thought we had to do something to accelerate our digital performance, number one,” Lawrie said. “Luxoft is positioned in an entirely different part of the market. This is really about an end-to-end value proposition. There’s very little overlap between what Luxoft does and what DXC does. The power of this is combining that end-to-end value proposition, so the front end capability, then the ability to integrate that into the existing IT infrastructures and fabric of our client base as well as Luxofts client base.”

Lawrie said for DXC, the deal comes down to talent. He said Luxoft has some of the best minds in the business and the company plans to put them to use to “more rapidly transform the DXC workforce” and acquire skills DXC needs more rapidly.

“Luxoft strengthens DXC’s portfolio of digital offerings with proven capabilities in high growth areas including analytics and business intelligence, user experience, IoT, and blockchain,” he said. “Luxoft also has a very strong outsourced engineering experience, utilizing a combination of deep product engineering capabilities and embedded software to deliver innovation and tailored technology solutions for their clients.”

The deal creates a potential digital powerhouse in the automotive industry, with the two companies together serving more than 20 manufacturers and OEMs throughout North America, Europe, and Asia Pacific. Lawrie said Luxoft recently completed a project for Daimler to create the Mercedes Benz user experience.

“(It is) A software platform that powers user experiences from the Mercedes Benz A Class vehicles,” he said. “Their automotive platforms and IP also include autonomous driving platforms, human machine interface, tool chain, digital cockpit, user experience, and the use of telematics and IoT for connected vehicles.”

The combined companies also plan to be a force in financial services, where the two will “service half of the top financial institutions in the Americas and Europe,” DXC said.

In spite of the potential overlaps between the two solution providers, Lawrie said Luxoft will not be folded into DXC but will remain an independent company, and Luxoft CEO Dmitry Loschinin will remain in his current job.

“We are not going to integrate Luxoft,” Lawrie said. “Dmitry will work for me. What we will do is we are going to have two what I’ll call go-to-market motions around digital. Our existing digital capabilities and offerings will continue to drive into the market place, those are much more directed towards the IT world. Luxoft will continue to drive its digital go-to-market motion, then we will put in the appropriate mechanisms to drive the cross sell and revenue synergies between those two.”