Computer Sciences Falls After Talks End

NEW YORK – Computer Sciences Corp. stock fell Monday on news that defense contractor Lockheed Martin Corp. and three private-equity firms broke off talks to buy the computer-services company.

Shares of the El Segundo, Calif.-based information-technology company fell $6.67, or 12 percent, to $48.22 in morning trading on the New York Stock Exchange.

Bethesda, Md.-based Lockheed decided to stop pursuing a deal after the discussions failed to progress beyond early contacts, The Wall Street Journal reported Saturday. Computer Sciences’ asking price appears to have been the key stumbling block.

Jeff Adams, a spokesman for Bethesda-based Lockheed, declined Monday to comment on the reports, telling the Associated Press that official company policy kept him from talking about them.

Calls to Computer Sciences were referred to a spokesman at the company’s headquarters in El Segundo, Calif., who didn’t immediately respond Monday to the Associated Press.

Computer Sciences insisted on $65 a share as a starting point for negotiations – more than a 25 percent premium at that time – and the suitors agreed. However, contacts ended after the Journal reported the $65 figure on Nov. 1, according to the newspaper.

Computer Sciences wanted to sell the entire company to Lockheed, which planned to keep Computer Sciences’ defense-contracting business and sell its commercial business to the private-equity group of Warburg Pincus, Texas Pacific Group and Blackstone Group, according to the Journal.

Some Wall Street analysts had called the $65 figure high, and put a more realistic takeout price in the $53 to $60 range. They seemed to be divided Monday on whether the talks could be revived or other suitors would surface. Some took solace that Computer Sciences was at the table at all, having in the past resisted selling the company, but recriminations bubbled up from other quarters.

“We had always believed one risk of a deal being completed was (Computer Sciences) management’s stubborn stance on the deal value and terms,” said Prudential analyst Bryan C. Keane in a note Monday. “Lockheed and the private equity consortium could come back with a new deal proposal, or other suitors could arise, although we view this outcome to now be unlikely.”

The drop returned the Computer Sciences stock to levels seen before the Journal’s reports of $65 a share deal-talk. The shares rose to a 52-week high of $59.90 on Nov. 1.

Lockheed shares rose $1.51, or 2.5 percent, to $61.45 on the NYSE.