Computer Sciences Corp., the networking and consulting company for businesses and government, may make an attractive takeover target for a private-equity company, a Jefferies & Co. analyst said.
A leveraged buyout at $56 a share would give an acquirer an internal return of more than 25 percent over five years, Joseph Vafi said in a note to investors today in raising his rating on the stock to “buy” from “hold.” Such a buyout would be 34 percent more than yesterday’s closing price.
The company has cut net debt during the past two years while its stock has fallen, making it easier for an acquirer to buy, Vafi said. CSC has been mentioned by analysts as a target for technology companies such as Oracle Corp. and Cisco Systems Inc., though they may not want all CSC divisions, he said.
A technology company “buying CSC is more complicated because of the large and very different businesses they have,” Vafi, who’s based in San Francisco and doesn’t own CSC stock, said in an interview.
A private-equity firm may sell off pieces of the company to appropriate buyers, he said. Several of the information technology company’s peers have been acquired, indicating that there will be a market for the company later, he wrote in the note.
Dell Inc. bought computer-services company Perot Systems Corp. for $3.6 billion last year. Affiliated Computer Systems Inc. was acquired by Xerox Corp. in February.
CSC, based in Falls Church, Virginia, rose $1.14, or 2.7 percent, to $42.87 at 4 p.m. in New York Stock Exchange composite trading. The shares have dropped 25 percent this year.