CSC files suit on unwanted suitor

Software services giant Computer Sciences Corporation, the subject of a $9bn hostile merger bid by Computer Associates, has filed a lawsuit against its would-be suitor for trying to bribe its chairman and damaging its relationship with its staff and customers. CSC has taken out the suit for unlawful, unfair and fraudulent business practices, under the California Unfair Business Practices Act.

CSC has alleged that Computer Associates chairman Charles Wang offered CSC chairman Van Honeycutt a $50m bribe to enable CA to go ahead with its $100 a share offer to buy CSC. A CSC spokesman said that, in conversations between Wang and Honeycutt, the CA chairman had offered $130 a share.

According to the spokesman, recently acquired strategy consultants Kalchas, which is fully owned by CSC, would be at risk if the merger went ahead.

“The real risk is that the cultures don’t match; the bid is not logical from our perspective, for our clients or our shareholders, and we risk losing lots of people,” he said.

If Computer Associates were to get clearance for the offer, CSC would lose its independence and would not be able to provide its clients with an unbiased service in software solutions nor in consultancy practices, he added.

“We are in a culture where people are important; I would not say that of Computer Associates,” he said.

CSC has publicly refused what it called an unsolicited and hostile bid of $9bn cash for its business on the grounds it would not be good for its shareholders. It also claims that $6.7bn worth of outsourcing deals made in the last year would be affected. More than 25 per cent of CSC’s anticipated 1999 revenue will come from the contracts, which allow clients to move to other software operations in the event of a hostile takeover.

CSC’s lawsuit is in response to CA’s threat of legal action against CSC’s board of directors.

CA said it threatened legal action because CSC’s board did not allow its shareholders to properly consider the share offer. It offered a 35 per cent premium on the closing price of CSC’s shares when it originally bid for the firm in December last year. It would not up the bid despite the rise in CSC’s stock of 4.2 per cent to $92.1875 at the end of January.

CA finally went public on a cash tender offer at a price of $108 per share for all outstanding common stock and preferred share purchase rights of CSC on 17 February 1998. According to CA, CSC has around 85 million shares in the market and is indebted to the tune of $700m. CA anticipated that the merged firms would have revenues of $11bn.

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