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HP bulks up in IT services with deal to buy EDS for US$12.6B in cash |
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Written by Michael Liedtke, THE ASSOCIATED PRESS
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Friday, 16 May 2008 |
SAN FRANCISCO - Hewlett-Packard Co. has agreed to buy Electronic Data Systems Corp. for about $12.6 billion, aiming to build a technology presence that could challenge IBM.
The companies said Tuesday their boards had unanimously approved the deal, in which EDS stockholders would get $25 per share in cash.
The sale is expected to close in the second half of this year and more than double HP's revenue from services, which was $16.6 billion in 2007. EDS had $22.13 billion in revenue last year.
The combined services business would have 210,000 employees - although some analysts expect HP would trim jobs - and operations in more than 80 countries.
HP said the business would be based at the EDS headquarters in Plano, Texas, and led by EDS chairman and CEO Ronald Rittenmeyer.
HP said it expects the deal would produce "significant" cost savings and add to earnings by next year.
Palo Alto-based HP and EDS had said Monday that they were in "advanced discussions" about a possible combination without providing additional details.
In Tuesday's announcement, the companies said the deal would have an enterprise value of $13.9 billion, HP's biggest deal in six years.
The price of $25 per share is a 32.5 per cent premium to the EDS stock price on Friday, before Hewlett-Packard confirmed Monday the takeover discussions and prompted a surge in trading of shares of the Texas-based services provider.
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Last Updated ( Friday, 16 May 2008 )
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