Cerberus Capital Management is backing an $8.2 billion (€6.2 billion) buyout of Affiliated Computer Services, a US listed outsourcing company, hoping to succeed where another private equity consortium failed last year.
Cerberus, which is acting in conjunction with the company’s founder and chairman Darwin Deason, has offered to pay $59.25 per share for ACS. This represents a 15.5 percent premium over Monday’s closing price and gives the deal a total value of $8.2 billion.
Cerberus has not yet raised the debt finance necessary to fund the deal, but said in its offer letter that it was “highly confident” that it would be able to do so.
Citigroup, which is advising the group and arranging the debt package, also advised ACS last year when the company was in negotiations with a private equity consortium about a possible $8 billion deal. The Blackstone Group, Providence Equity Partners, Texas Pacific Group and Silver Lake Partners were all reportedly involved in the bidding group, but the two sides failed to reach an agreement on price.
ACS subsequently announced a share buyback programme where it offered to buy back up to 45 percent of its shares at $63 each, well above the current bid price.
The company was hit by scandal last November, when it admitted that it had backdated managers’ options to inflate their value. It was forced to sack its chief executive and finance officer, and pay out more than $50 million in extra accounting expenses.
The bidding group was keen to stress its ability to do a deal quickly and minimise disruption. Deason said: “I would continue as executive chairman following the transaction, and the business would continue to be run in accordance with ACS’s current practice while maintaining its valuable employee base, which Cerberus and I view as one of its most important assets.”
Cerberus is a specialist distressed debt investor, often buying into companies in need of restructuring or turnaround. Last year it led the $14 billion consortium deal for GMAC, General Motors’ commercial finance unit. It is currently raising a $6 billion fund, its biggest ever.
Yesterday ACS shares closed up 17 percent at $59.95, above the offer price, suggesting that investors believe a higher bid could still be imminent.