Affiliated Computer gets $5.93B offer

An investment group that includes the founder and chairman of Affiliated Computer Services is offering $5.93 billion in cash to take the information technology services company private.

Affiliated Computer Services Inc. Chairman Darwin Deason said Tuesday he has teamed with investment partner Cerberus Capital Management to make the $59.25 per share bid. That represents a 15.5 percent premium to ACS's closing price Monday of $51.29 on the New York Stock Exchange.

But ACS shares rose above the offered price Tuesday, climbing $8.69, or 17 percent, to close at $59.98 on the New York Stock Exchange. They have traded in a 52-week range of $46.50 to $63.61.

The buyers would also assume about $2.3 billion in debt as part of the deal.

That bid is a good price for shareholders "in the short term, yes," said Cynthia Houlton, an analyst with RBC Capital Markets. "Over a longer-term horizon, I don't think all shareholders will think it's a great price, given that in the 12-month price range, the stock has been higher than that recently."

An ACS spokesman said the company's board had received the proposal and will issue a response "in due course."

The company provides services including payroll and insurance claim processing, electronic document handling and storage, and call center functions. Its customers include General Motors Corp., MetLife Inc., Motorola Inc., more than 1,000 colleges and universities, and various government agencies.

"I believe that this offer and our proposed process will maximize value for all of ACS's shareholders," Deason said in a statement.

He added he would keep the company's "valuable employee base," and would continue as chairman following the deal.

Citigroup Global Markets Inc. has provided a "highly confident" letter regarding its ability to raise the debt necessary to complete the transaction.

Standard & Poor's Ratings Services said in a statement Tuesday it is reviewing ACS' financial situation and may downgrade the company's debt rating, which is at junk status. A lower debt rating makes it more difficult for a company to borrow money.

ACS, a Dallas-based company with about 58,000 employees, has had to deal with ethics issues and profits in recent months, including last month's announcement that its fiscal second-quarter profit had slid 30 percent. ACS officials said sharply higher costs were outweighing stronger demand for its information technology services from commercial and government clients.

Net income dropped to $72 million, or 72 cents per share, from $102.4 million, or 81 cents per share, in the year-earlier period.

Revenue rose 6 percent to $1.43 billion from $1.35 billion on a 9 percent rise in commercial segment sales and a 10 percent jump in government segment sales.

In January, ACS hired a chief ethics officer in response to an investigation that showed the company's CEO and top financial officer had manipulated grant dates for stock options in violation of the company's ethics code. The two executives announced their resignations in November, although they will remain on the job until June. Investigations by the Securities and Exchange Commission and the company are ongoing.

Also in January, ACS agreed to buy Atlanta-based software company Albion Inc. for $30 million.

ACS reported revenues of $5.35 billion for 2006.