Infotech Lead America: After clocking 3 percent dip in revenues to $3.85 billion in Q2 2013, CSC has sold its credit services unit to Equifax for $1 billion in cash.
CSC is already taking several significant steps to divest certain non-core assets such as a smaller business in Italy.
During Q2, CSC had strengthened its portfolio through acquiring a software development company that specializes in big data, analytics and advanced applications. This action is consistent with CSC’s strategy of being a leader in next generation technology solutions and services.
The definitive agreement with Equifax is part of its transformation initiative to rebalance its portfolio of services and focus on next-generation technology solutions and services.
The after-tax proceeds from the sale of the business will be approximately $750 – $800 million based on preliminary plans. CSC intends to use $300 – $400 million to repurchase shares, contribute $300 – $400 million to its pension plans and apply the remainder to general corporate purposes.
“Upon closing, we will receive $1 billion in cash and we intend to redeploy these funds for share repurchases and to fund our pension plan, which will be value accretive.”
CSC’s credit services unit, which owns credit files in 15 Midwestern and Central U.S. states representing 20 percent of the U.S. population, is the largest independent U.S. consumer credit reporting agency and has been an Equifax affiliate for more than 20 years.
This deal marks CSC’s second divestiture in six weeks.
“This transaction advances CSC’s turnaround by reshaping our portfolio and enabling the company to focus on next-generation technology solutions and services,” said Mike Lawrie, president and CEO, CSC. “Upon closing, we will receive $1 billion in cash and we intend to redeploy these funds for share repurchases and to fund our pension plan, which will be value accretive.”
For this current fiscal year CSC’s Credit Services business is tracking to approximately $230 million in revenue, $100 million in operating income and $0.40 of earnings per share. The credit services business results have been previously reported in CSC’s Business Solutions and Services segment.
CSC expects that its cash deployment strategy will help to offset the absence of EPS contribution from the credit services unit in 2014 and subsequent years.
During Q2, CSC’s revenue from Managed Services Sector (MSS), Business Solutions & Services (BSS) and North American Public Sector (NPS) declined y-o-y by 2 percent, 3 percent and 4 percent, respectively.