IT consulting and services firm Ciber Inc [CBR] has announced plans to acquire federal sector IT services firm SCB Computer Technology Inc [SCBI.OB].
Colorado-based Ciber will pay a total of $55.9 million in cash and shares to acquire Tennessee-based SCB, by paying $2.15 for each of SCB’s 26 million outstanding shares.
Ciber is paying a significant discount for the company, at less than half its current revenue run rate of $135 million. Ciber is also taking on SCB’s debt, which stood at $29.5 million on July 31, and total assets of $51 million.
The move for SCB is the largest acquisition to date by Ciber, dwarfing the April 2002 takeover of IT consultancy Decision Consultants, which had full-year 2001 revenue of $120 million. It also follows the January 2003 takeover of ECSoft for $52 million (GBP34 million), which expanded its European footprint in the UK, Germany, Hungary and the Netherlands.
In June it bought US-based network integrator Alphanet Solutions for $29 million, and most recently in July, it edged into the offshore outsourcing market forming a joint venture company with iGate Global Solutions.
SCB meanwhile, was set up in 1976, and provides IT consultancy, staffing and systems integration services primarily to the US federal sector, where it makes up to 50% of its revenue, with 35% coming from state and local clients.
It employs over 1,500 people and counts the states of Arkansas, Virginia, Tennessee, Kentucky, Louisiana, Mississippi, and Nevada among its customers, as well as America West Airlines and the US Army.
However, SCB has struggled in recent quarters following high-profile contract problems with the Commonwealth of Kentucky, which the company announced had been handed over to six new vendors. This is expected to reduce 2004 revenue by $6 million, and at the same time, SCB warned that despite its own recent acquisitions of Remtech Services and National Systems & Research, revenue and profit for full-year 2004 would be between $118 million and $128 million compared to previous guidance of between $125 million and $140 million. This caused the company’s share price to slump 33% in the space of one day, from which it has largely failed to recover.
Following the SCB deal, Ciber expects revenue for its year ending December 31 to be $850 million, of which around a third, or $150 million will be from the federal, state and local government sectors, up from just 10% in 1999.
Ciber expects the SCB acquisition to be accretive to earnings by January 2004, and add earnings of between $0.05 and $0.06 per share in 2004.
This article was based on material originally published by ComputerWire.