CA takeover bid for CSC looks doubtful

Acquisition Analysts have warned that the hostile bid is likely to fail.

Computer Associates (CA) has applied to the Federal Trade Commissionail. and the US Department of Justice for regulatory approval for its proposed $9 billion takeover of Computer Sciences (CSC) amid warnings from industry analysts that a hostile bid is destined to fail.

CA offered $108 a share for CSC, suggesting the merger would be mutually beneficial and the proposal had been made following discussion between the two firms. CA founder and CEO Charles Wang, who has a reputation for aggressive acquisitions, said the deal would make CA 'the only vendor capable of offering platform-neutral products and services in an integrated end-to-end fashion'.

But Van Honeycutt, CEO of CSC, denied negotiations had taken place. 'While there have been two brief meetings at CA's request, any suggestion of agreements between the two companies is false,' he said.

He also warned shareholders to avoid acting on the offer until they had received CSC's official response. But he has been placed under further pressure by a lawsuit seeking the appointment of a review board to consider whether rejection of the bid is in shareholders interests.

Analysts have suggested that the services company, which employs over 44,000 people worldwide, may look elsewhere for a more suitable bidder.

Ben Pring, analyst at Dataquest, said: 'I'd be very surprised if this bid succeeds - it will depend on whether CA can appeal to shareholders' greed.'

Independent analyst Richard Holway agreed: 'Any kind of hostile acquisition of a people-based organisation like CSC is bound to cause trouble.'

He added: 'The whole raison d'etre for a company like CSC is independence. While Wang says he will allow CSC to offer impartial advice, can you really see him letting it recommend a competitor? I believe CSC will be acquired - but not by CA.

It's more likely to be EDS, Cap Gemini or IBM.'

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