Daniel, here's a fairly detailed article from the Canadian Globe and Mail:
EDS poised to buy Systemhouse
Deal, reported to be worth $1.6-billion, marks second time in less than four years the firm has been sold
Thursday, February 11, 1999
MARK EVANS
Technology Reporter
Electronic Data Systems Corp. is poised
to buy SHL Systemhouse Inc. for a
reported $1.6-billion (U.S.), the second
time in less than four years that the
Canadian computer services and consulting
firm has been sold.
The deal has been anticipated for several
months as analysts and investors tried to
determine what WorldCom Inc. would do
after it purchased MCI Communications
Inc. -- Systemhouse's parent -- last year for
$47-billion.
The value of the deal hasn't been disclosed,
but MCI acquired Ottawa-based
Systemhouse in 1995 for $1-billion to
combine MCI's corporate and consumer
communications business with the Canadian
firm's service expertise. During MCI's
ownership, Systemhouse's revenue has
jumped 50 per cent to $1.8-billion in 1998
from $1.2-billion in 1994.
EDS of Plano, Tex., would not comment
on the rumoured deal, except for a press
release that said the firm will announce the
acquisition today of "another major
information technology services company."
Systemhouse was not available for
comment.
"They're buying SHL Systemhouse, you
can take my word on it," said Keith Ellis,
an analyst with IDC (Canada) Ltd.
The deal makes sense, Mr. Ellis said,
because it would combine EDS's strength in
computer outsourcing with Systemhouse's
large presence in the systems integration
and design market. Both these businesses
are growing rapidly as more companies
seek specialists to operate and maintain
their computer systems.
The Wall Street Journal reports today that
the acquisition is worth $1.6-billion and is
part of a larger agreement to swap assets
worth about $17-billion. Besides the
Systemhouse transaction, MCI will shift
software development and computer
operations to EDS under a deal valued
between $5-billion and $7-billion through
2010. EDS will turn over its networking
operations and staff to MCI under a deal
valued at $6-billion to $8.5-billion.
The speculation about Systemhouse's
future heightened in December after it was
reported that MCI Worldcom of Jackson,
Miss., was talking with several companies
about its sale.
The list of possible suitors included Bell
Atlantic Corp. and SBC Communications
Inc. but EDS was seen as the most logical
buyer.
Bernard Ebbers, MCI WorldCom's
Canadian-born chief executive officer, has
set aggressive profit and revenue targets for
the company and Systemhouse didn't
appear to fit into his high-growth strategy.
The Ottawa company was also considered
to be too small to handle the wide range of
services that MCI WorldCom wants to
offer corporate customers.
The acquisition of Systemhouse would be
the first big move made by Richard Brown,
who took over as EDS's CEO last month.
While CEO with Cable & Wireless PLC he
made the company the second-largest
telecommunications carrier in Britain.
In Canada, the transaction would create an
entity with annual revenue of more than
$1.3-billion (Canadian). Only IBM Canada
Ltd., which has service revenue of about
$2-billion a year, would be larger in the
area.
Systemhouse, which employs 9,000 people,
has done particularly well in Canada. Mr.
Ellis said service revenue jumped 29 per
cent last year to $756-million, while
equipment sales were about $400-million.
EDS Canada's revenue rose 13 per cent to
$570-million, he said.
EDS, which was spun off by General
Motors Corp. in 1996, posted revenue last
year of $16.9-billion (U.S.), an 11-per-cent
increase from $15.2-billion in 1997.
EDS, which employs 110,000 people in 47
countries including Canada, has been losing
market share to rivals such as International
Business Machines Corp., and analysts
expected Mr. Brown, a noted deal maker,
to use acquisitions to spur growth.
theglobeandmail.com |
