CSC bolsters Homeland Security offerings with DynCorp buy

In a move that will expand its work with the federal government, Computer Sciences Corp. is buying DynCorp, an employee-owned information technology and outsourcing company.

The stock and cash deal, valued at $950 million, would increase CSC's revenue from the federal government to $6 billion a year, making it one of the 10 largest government contractors, the companies said.

CSC, of El Segundo, Calif., also will assume all of DynCorp's $273 million in debt.

"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," Van B. Honeycutt, CSC chairman and CEO, said in a statement.

CSC ranked No. 6 on Washington Technology's 2002 Top 100 systems integrators in the federal information technology market, while DynCorp ranked No. 22. The combined companies would rank No. 3 on the list, behind Lockheed Martin Corp. and Northrop Grumman Corp, which just completed its purchase of TRW Inc.

The 43-year-old CSC, posting revenue of $11.4 billion for the 12 months ending Sept. 27, does business with every agency in the U.S. government. Its major competitors include Electronic Data Systems Corp. and IBM Corp.

After closing Dec. 12 at $34.67, shares of CSC opened down at $34.50 on Dec. 13, hours after the acquisition was announced.

Under terms of the deal, which requires shareholder and regulatory approvals, CSC will pay $15 cash and about $43 in market value of CSC stock for each share of privately held DynCorp.

DynCorp of Reston, Va., which had $2.3 billion in revenue for the 12 months ending Sept. 26, will become part of CSC's Federal Sector division, based in Falls Church, Va.

"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," Paul V. Lombardi, DynCorp's president and chief executive, said in a statement.

The companies expect the deal to close in the first quarter of 2003.