Computer Sciences to buy Policy Management Systems for 0.88 times revenue

Weekly Corporate Growth Report, Jul 3, 2000

The Deal: The Computer Sciences Corp. has agreed to pay $16 a share, or $568 million, for insurance software developer and outsourcer Policy Management Systems Corp. The deal represents a 46 percent premium to Policy Management's $10.9375 closing price before the offer. After the news of the offer was announced, Policy Management shares rose $3.9375 to $14.875, while Computer Sciences shares fell $11.8125 to $71.3125.

Discussion: A leading developer of insurance industry software, Policy Management Systems provides software and services to more than 1,000 insurance and financial services companies. Its professional and outsourcing services -- including business needs analysis and implementation, consulting, data processing, and training -- claim nearly 80 percent of sales. Policy Management's software automates accounting, cash management, claims processing and underwriting, among other functions. Customers in the U.S. account for about 70 percent of sales.

Computer Sciences is among the world's leaders in information technology services -- outsourcing, management consulting, and systems integration. Its services include applications development, systems analysis, business process reengineering, network operations outsourcing and change management. The U.S. government accounts for 25 percent of sales. Other customers include AT&T, Enron, and the U.S. Postal Service. The acquisitive company, which has more than 700 offices worldwide, is expanding its presence in Europe. It is also rolling out new services geared toward e-commerce.