CSC in US$300m Australian services slurp

Prey company UXC operates a dozen diverse services outfits

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CSC is going shopping in Australia, dangling a cheque for AU$428m (US$305m, £200m) to the shareholders of services company UXC.

UXC is a group of enterprise services companies that has grown by acquisition. Component companies offer services such as application integration, delivery and operation of enterprise infrastructure and general IT consulting. The group even includes analyst house Telsyste. The company enjoys turnover of AU$686 million and has 3,000 people on staff.

The UXC board, in a statement (PDF), says it “has determined that it is in the interests of its shareholders to engage further with CSC with a view to finalising an implementation agreement to implement the transaction.”

The two companies have agreed a five-week due diligence period, during which UXC won't actively talk to or seek other suitors. The board says it will of course consider other offers, but that CSC has the right to match another offer. If UXX walks away, it will pay a “break fee” to CSC.

Or in other words, the two companies are pretty keen on getting this done and have made it hard for another company to outbid CSC.

Vulture South hears that multinationals aren't faring well in Australia's services market, in part because local companies like UXC can deliver at lower cost. Some deals we're aware of have therefore been structured so that top tier companies like IBM and HP are prime contractors (and throats to choke) with locals or cheaper multinational rivals doing the actual work. As the likes of HP and IBM restructure their workforces, their Australian outposts do so with an eye on reducing costs so they can compete more effectively for local services deals.

By slurping UXC, CSC may well be giving itself the chance to pull off a similar trick while also addressing its slowing growth. The company will also be buying plenty of decent ongoing engagements, lots of skilled people and a footprint in one of Asia's larger IT markets (for now).

The antipodean deal comes as CSC nears its effort to spin out its US federal business. ®


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