Hewlett Packard Enterprises (HPE) has sold off its business services division to CSC for around $8.5bn.
The deal means that HPE can now focus on shifting hardware and software to large enterprises. It picked up the technology outsourcing and management services business when it acquired Electronic Data Systems (EDS) for nearly $14bn in 2008.
It also means that the firm will get rid of one-time CEO Mark Hurd’s biggest acquisitions. But the division has lagged behind other parts of the business both in terms of growth and profit.
The division accounted for more than a third of HPE’s 2015 revenues and has approximately 100,000 employees. The sell-off includes creating $4.5bn of new shares, a cash dividend of $1.5bn, and the handover of around $2.5bn in debt and other liabilities. This leave HPE with a business worth around $33bn in annual revenues. The deal will boost CSC’s business to about $26bn with HPE shareholders owning 50 percent of the merged business.
Mike Lawrie will become chairman, president and CEO of new company with Meg Whitman joining the board, which will be split 50/50 between directors nominated by HPE and CSC. The company also has a commitment to sell HPE’s products.
"The 'spin-merger' of HPE's Enterprise Services unit with CSC is the right next step for HPE and our customers," says Meg Whitman, president and chief executive officer of Hewlett Packard Enterprise. "Enterprise Services' customers will benefit from a stronger, more versatile services business, better able to innovate and adapt to an ever-changing technology landscape."
Lawrie says "as a more powerful, versatile and independent global technology services business, this new company will be well positioned to help clients succeed on their digital transformation journeys."
The transaction should close in 2017.
