Computer Sciences Acquires DynCorp

Information technology consultancy Computer Sciences Corporation is creating a bigger footprint in the government sector with its $950 million purchase of IT firm DynCorp.

The merger, which includes CSC’s assumption of all of DynCorp’s $273
million debt, would rank CSC as a top 10 government contractor, the
companies said.

Once it closes after customary federal and shareholder review, the El
Sequndo, Calif.-based CSC will have much stronger footing to compete with
major IT services firms such as IBM and EDS as they line up for new federal
dollars earmarked
for homeland security initiatives.

CSC Chairman and Chief Executive Officer Van B. Honeycutt said the deal
is part of the company’s plan to grow internally and by acquisition.

“With this transaction, we are seizing an opportunity to significantly
strengthen our leadership position in the U.S. federal marketplace, augment
our capabilities to support the requirements of the new Homeland Security
Department and respond to the federal government’s initiative to increase
its reliance on service providers.”

The companies said the combined skills of their staffs blend well, and would enable the merged company to expand its products and offers to both
civil agencies and the various departments within the Department of Defense.

Founded in 1946, the Reston, Virginia-based DynCorp counts more than 40
federal agencies as clients, including departments of Defense, State,
Agriculture, Energy and Justice, the Centers for Disease Control and the
Defense Information Systems Agency. Its services contracts cover network
integration, high-tech range operations, global defense logistics, maintenance services and contingency support.

But its work on homeland security services and infrastructure management
of critical defense assets are key practices that CSC needs, as the federal
government gears up for IT spending for the creation of the new cabinet
level Department of Homeland Security.

Input, a Virginia firm that specializes in IT market research, estimates that the $37 billion budget to create the Department of Homeland Defense, which includes merging 22 different government agencies, has earmarked some $2.1 billion for IT contracts.

The Government Electronics and Information Technology Association, an interest group, estimates that the federal government overall will spend more than $74 billion on information technology in fiscal 2003.

With more than 23,000 staff in over 550 positions in the world, and
fiscal 2002 revenues of $2.3 billion, DynCorp is among the largest
employee-owned information technology and outsourcing firms headquartered in
the U.S.

CSC has similar roots. Two computer analysts who had worked with federal
agencies via the aerospace industry launched the company in 1959. One of the
founders, an IBM alum, helped develop the FORTRAN computing language.

CSC’s fiscal second quarter revenues alone were $2.7 billion. Although
down slightly from the same year-ago period, CSC’s U.S. federal government
activities helped keep the gap from widening.

The companies said DynCorp would become part of CSC’s Federal Sector
unit, which currently counts about 15,000 employees and is headquartered in
Falls Church, Va.

The combined organizations are expected to bring greater
scale to CSC’s presence in the U.S. federal marketplace. CSC said when the
purchase closes, the merged company is expected to take in about $6 billion
a year in revenue from the federal government (based upon estimated fiscal
2003 year-end revenues). In all, it would count nearly 38,000 staff working
on U.S. government contracts around the globe.

“The combination provides our customers with broader resources and an
even higher level of quality services, while enhancing and broadening
professional opportunities for our employees,” said DynCorp President
and Chief Executive Officer Paul Lombardi.

After the deal closes, each DynCorp share is to be converted into $15 in
cash and $43 in market value of CSC shares.

Information technology consultancy Computer Sciences Corporation is creating a bigger footprint in the government sector with its $950 million purchase of IT firm DynCorp.

The merger, which includes CSC’s assumption of all of DynCorp’s $273
million debt, would rank CSC as a top 10 government contractor, the
companies said.

Once it closes after customary federal and shareholder review, the El
Sequndo, Calif.-based CSC will have much stronger footing to compete with
major IT services firms such as IBM and EDS as they line up for new federal
dollars earmarked
for homeland security initiatives.

CSC Chairman and Chief Executive Officer Van B. Honeycutt said the deal
is part of the company’s plan to grow internally and by acquisition.

“With this transaction, we are seizing an opportunity to significantly
st

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