HP Enterprise, CSC merge for pure-play IT services company

CSC, the provider of technology enabled business solutions and services, is merging with the Enterprise Services segment of Hewlett Packard Enterprise. The strategic partnership claims to create one of the world’s largest pure-play IT services companies, uniquely positioned to lead clients on their digital transformations. The new company is expected to have annual revenues of $26 billion and more than 5,000 clients in 70 countries.

Expected to reach completion in March next year, the merger is currently subject to shareholder and regulatory reviews and approvals. Following the transaction, CSC and HPE shareholders each will own approximately 50 percent of the new company’s shares. The transaction is intended to be tax-free to CSC and HPE and their respective shareholders for federal income tax purposes.

Once the merger completes, Mike Lawrie, Chairman, President and CEO, of CSC will take up the same role in the new company, while Meg Whitman, President and CEO, HPE will join the new company’s Board of Directors, split equally between nominees of CSC and HPE.

Whitman says, “The ‘spin-merger’ of HPE Enterprise Services with CSC is the right next step for HPE and our customers. Enterprise Services’ customers will benefit from a stronger, more versatile services business, better able to innovate and adapt to an ever-changing technology landscape. As two companies with global scale, strong balance sheets and a focus on innovation, both HPE and the new company will be well positioned as leaders in their respective markets.”

The combination of CSC and HPE’s Enterprise Services segment will create a new company with substantial scale to serve clients more efficiently and effectively worldwide. For clients, the new company will offer enhanced global access to world-class, next-generation offerings combined with deep industry experience in key industry sectors.

“Our proposed merger with HPE Enterprise Services is a logical next step in CSC’s transformation. As a more powerful and versatile global technology services business, the new company will be well positioned to innovate, compete and serve clients in a rapidly changing marketplace. We are excited by the great potential this merger brings to our people, clients, partners and investors, and by the opportunity to strengthen our relationship and collaboration with HPE,” says Lawrie.

The new company offerings

World-class strength in customer service and IT operations claiming to be the safest pair of hands in the industry, deploying a broader set of resources and expertise to benefit clients. Market-leading industry and technology expertise in areas such as financial services, healthcare and life sciences, transportation, consumer products, and insurance, helping customers transform faster. A Global outreach that will be operating 85 delivery centers and 95 data centers across 70 countries, providing access to the most efficient IT services in the world.

Technology independence and best-in-class capabilities in next-generation cloud, security, application development and modernization, big data and analytics, mobility, workplace, and sophisticated business process and IT services. Combined leadership of both the companies, bringing deep turnaround experience and transformation capabilities, customer relationships, sales/GTM, industry and functional expertise. Expanded best-of-breed technology partnerships that provide greater choice of solutions; and enhanced innovation, R&D, and investment opportunities for new services and solutions.

The merger of the two businesses is expected to produce first-year synergies of approximately $1 billion post-close, with a run rate of $1.5 billion by the end of year one. There is an opportunity for additional synergies in subsequent years. As owners of approximately 50 per cent of the merged company, HPE shareholders will share in the value of the synergies, as well as future growth in earnings.