Analyst’s LBO suggestion quickly raises CSC stock
Contractor called an attractive takeover target
- By David Hubler
- Sep 10, 2010
Computer Sciences Corp. stock rapidly rose $1.27 a share, or 3 percent, to $43 just before markets opened today in New York when an industry analyst cited the company as an attractive takeover target for a private-equity firm.
CSC’s stock closed at $41.73 on Sept. 9. In a note to investors today in Tech Trader Daily, analyst Joseph Vafi of Jefferies and Co. said, “CSC’s cash position and trough valuation have created one of the best [leveraged buyout] opportunities we have seen in several years.”
A leveraged buyout at $56 a share would give an acquirer an internal return of more than 25 percent over five years, he added.
Vafi also raised his rating of CSC stock from “hold” to “buy.” Such a buyout would be 34 percent more than the Sept. 9 closing price.
Vafi said the company had cut its net debt in the past two years while its stock had fallen, making it easier for an acquirer to buy.
In reporting on Vafi's comments, Bloomberg News noted that several other companies in the IT field have recently been acquired and cited Dell Inc.’s purchase of Perot Systems Corp. last year and Xerox Corp.’s acquisition of Affiliated Computer Services Inc. in February.
CSC, of Falls Church, Va., ranks No. 10 on Washington Technology’s 2010 Top 100 list of the largest federal government contractors.
David Hubler is the former print managing editor for GCN and senior editor for Washington Technology. He is freelance writer living in Annandale, Va.