The founder of Affiliated Computer Services Inc has teamed up with a private equity firm in a bid to acquire the BPO and IT services vendor for just under $6bn in cash.
Shares in the Dallas, Texas-based company soared nearly 17% to close at $59.95 on Tuesday, just above the $59.25-per-share cash offer, which was a 16% premium on its Monday closing price, indicating that investors suspect an even higher offer will emerge.
Darwin Deason, who still presides as ACS’ executive chairman, intends to take the company private with the backing of New York-based Cerberus Capital Management, through a $59.25 cash offer, valuing the company at $5.9bn, though the bid also involves the assumption of around $2.3bn in debt.
It isn’t the first time ACS has been linked with a private equity takeout, though this is the first firm bid. Early in 2006 ACS’ share price was trading at over $60 before the company announced that takeover talks with private equity firms Texas Pacific Group, Blackstone Group, and Silver Lake Partners had fallen through.
Since then ACS has suffered a traumatic time. It became embroiled in a stock option scandal that led to it parting company with its CEO Mark King and its CFO Warren Edwards as both were judged to have violated ACS’ code of ethics. The investigation led to delayed financial filings and last month it revealed a 29% drop in second-quarter profit due to charges related to its ongoing stock options review.
Although ACS can trace its current form back to 1988, its origins go back to 1967 when Deason took over a firm called Affiliated Computer Systems. In 1975, Deason sold the company to Dallas-based MTech, but stayed on as its president. When MTech was bought by EDS in 1988, Deason left to start a new company under the Affiliated Computer Services moniker.
It expanded its IT services offerings and then entered the BPO space (which now makes up around 75% of its revenues) through the acquisition of Dataplex in 1992. ACS went public in 1994 and Deason oversaw a number of acquisitions before he stepped down as CEO in 1999.
The Deason/Cerberus deal would involve taking the company private through delisting its shares from the New York Stock Exchange. Deason proposes to continue to operate as executive chairman, though it is not clear as to the role of the current board members, who it intends to open negotiations with.
Deason commended the offer through a statement in which he said: I believe that this offer and our proposed process will maximize value for all of ACS’s shareholders. ACS was unavailable for comment at the time of going to press.
ACS also announced yesterday that Riet Cadonau has been promoted to head up its European operations, as reported in Computer Business Review earlier this month. He replaces Brian Stones who left the company at the end of last year for undisclosed reasons.