Electronic Data Systems Corp has made a UKP116.2m cash offer for the beleaguered SD-Scicon Plc, only days after Cray Electronics Plc’s UKP109m offer was described as derisory and opportunistic. The cash offers are 45 pence for SD-Scicon’s ordinary share, 85 pence for preference shares and sixpence for deferred shares. Cray’s offer document highlighted the company’s […]
Electronic Data Systems Corp has made a UKP116.2m cash offer for the beleaguered SD-Scicon Plc, only days after Cray Electronics Plc’s UKP109m offer was described as derisory and opportunistic. The cash offers are 45 pence for SD-Scicon’s ordinary share, 85 pence for preference shares and sixpence for deferred shares. Cray’s offer document highlighted the company’s poor financial record over the past few years and it raised questions about management and strategy. In turn, SD-Scicon has cast doubts on Cray’s financial position and the newly acquired management team’s experience. EDS says that it has studied both documents and believes that they show the need for SD-Scicon’s assets and skills to be harnessed within an experienced and financially disciplined organisation. Also, EDS lays claim to have pioneered fixed price contracts, a skill that SD-Scicon has found difficult to master. EDS acknowledges that it has been talking with SD-Scicon for nine months, but when the management refused to back an acquisition offer, EDS says it was content to not to force the issue. However, it says that it had no choice but to act once Cray made its hostile bid. Bob Sharpe, EDS vice president for worldwide business development, denies that the bid is too low and describes it as fair and full value. Is it hostile? Sharpe insists that EDS tried to persuade the SD Scicon management to meet and work out a solution, and he says that he would still like to get their approval. As regards British Aerospace Plc’s approv al of Cray Electronics’ offer and the commitment to indemnify costs of UKP500,000, he describes it as squabbling in the family and says that breakup fees are a common occurrence in the US. EDS has studied the terms of the undertaking and believes that Brit ish Aerospace will be entitled to accept its offer a from July 8, unless Cray’s bid has become unconditi onal. Does he blame SD-Scicon’s management team for the mess the company finds itself in? Like Truman, he thinks the buck stops here, and that means the man at the top. So, given SD-Scicon’s shortcomings, why does EDS want to buy? SD-Scicon’s industry knowledge matches that of EDS and it has excellent technical skills. It lacks financial strengths and discipline, and EDS itself requires strong representation across Europe. EDS says that if the bid is successful, the two companies will continue to operate independently for some time. There may be room for mergers, but it is keen to stress that such an acquisition is an opp ortunity for growth, not rationalisation. Does that mean that the existing staff and management team would be kept in place? EDS says it will honour existing obligations, and it has no redundancy plans, but management roles still have to be evaluated and discussed with the incumbents. SD-Scicon has rejec ted Electronic Data Systems’ offer and says that it is still far too low. Accordingly, the company is recommending that its shareholders take no action.