Computer Sciences Corp
) is set to dispose of its Applied Technology Division (ATD),
which deals with base operation, range service and aviation
services, to PAE for a sum of $175.0 million in cash.
This is the sixth continuous divesture that the company made
over a period of seven months. This reiterates the fact that CSC
is committed on rebalancing the company's portfolio in a way,
which will help them strengthen the company's business model by
focussing on core strength of the company.
As per the contract, Computer Sciences Corporation will sell
the aviation maintenance, base operations and maintenance, test
and training range and space range businesses, while retaining
the training and simulation business. ATD's business currently
spans across the United States covering more than 20 client
Again, this acquisition would be of help to PAE as it would
help the company gain access to the military and space testing
and training services which will be a new capability. It will
also increase PAE's clients in the federal services
Moreover, this acquisition will give PAE access to 5400
trained employees, who have the experience of providing quality
services to government and semi-government departments, NASA and
the Department of Defence.
We believe that this is a win-win situation for both the
companies, as CSC is trying to become a lean organization by
divesting ATD. The sale of ATD is particularly beneficial for the
company as the company is trying to focus more on the next
generation of technology solutions and servicesas it has already
built its expertise to deal with government organizations. On the
other hand, PAE is trying to increase its competence in
government and semi-government verticals.
Computer Sciences has stepped up the rate of divestitures over
the last few quarters. Computer Sciences is expected to sell its
Enterprise Systems Integration unit in order to streamline its
operations. The unit will go to a consortium that includes ITOCHU
Techno-Solutions Corp. for a total cash consideration of $90
At the end of Oct 2012, Computer Sciences sold a part of its
business, consulting and systems integration services, in Italy
to Dedagroup. Moreover, in Dec 2012, the company sold its credit
services unit to Equifax for $1 billion.
In addition to this, in 2013, the company sold its Australian
IT staffing unit to Adcorp for $73.5 million. Through these
divestures the company points toward its intention to focus on
core competency and to turn itself into a more profitable
organization. All the above mentioned divestitures were made with
the intention of strengthening the business model of the
However, the company is feeling the heat of competition from
the likes of
), coupled with a challenging macroeconomic condition in Europe.
In addition to this, delayed order renewal process of the Federal
government can make things difficult for the company.
Computer Sciences has a Zacks Rank #4 (Sell).
Investors can also consider other stocks such as
), both carrying a Zacks Rank #1 (Strong Buy).
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