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Why CSC Has Set Its Sights on Acquiring Xchanging

PART:
1 2 3 4 5
Part 5
Why CSC Has Set Its Sights on Acquiring Xchanging PART 5 OF 5

Why CSC Stock Has Taken a Beating Recently

On account of split, CSC shares fell ~55%

In the prior part of the series, we discussed CSC’s (CSC) plans to expand its presence and offerings through the acquisition of Xchanging and UXC. Apart from these two acquisitions, the company has made headlines in 2015 regarding its split into two companies, CSC and CSRA.

CSRA was formed by the spinoff of CSC’s government-related business and the purchase of SRA International. The breakup of CSC and CSRA into two separate companies, effective November 30, was likely the reason for the ~55% fall in CSC’s share price on November 30 as the below share price chart shows. In May 2015, Computer Sciences announced its decision to split itself into two publicly traded companies.

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CSC is the latest to succumb to activist investor pressure

Prior to CSC, leading technology players like HP (HPQ), EMC (EMC), and Symantec (SYMC) succumbed to pressure from activist investors and technologies like social, mobile, analytics, and cloud (or SMAC) that are driving change in the IT and technology sector. In EMC’s case, it was Elliott Management that forced the company to consider Dell’s (DELL) proposed acquisition for $67 billion, the largest acquisition deal in the technology sector to date.

In CSC’s case, JANA Partners pushed it to seek “strategic alternatives” like a split, a merger, or an acquisition. In early 2015, activist hedge fund JANA Partners disclosed that it had a 5.9% stake in Computer Sciences.

However, JANA Partners reduced its holdings in CSC to 4.1%. It continued to state that it remains “highly supportive of the recent steps” taken by the company including their decision to split.

You could consider investing in the iShares US Technology ETF (IYW) to gain exposure to CSC. IYW has an exposure of 45.2% to application software and invests around 0.11% of its holdings in CSC.

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