Computer Sciences Corp. (NYSE: CSC) CEO Mike Lawrie told investors Tuesday the company will consider an undefined range of options regarding Hewlett-Packard Enterprise‘s (NYSE: HPE)’s U.S. public sector business in conjunction with CSC’s merger into HPE’s enterprise services segment.
Tysons, Virginia-based CSC is subject to a two-year non-compete agreement in the federal government field with CSRA (NYSE: CSRA), the Falls Church-headquartered government technology services contractor formed in November 2015 through the spinoff of CSC’s U.S. public sector business and subsequent merger with SRA International.
The pact also restricts CSC and CSRAÂ from “engaging in certain business activities in certain areas of the U.S. state and local government field” during the two-year period that went into effect upon CSRA’s official Nov. 30 launch, says a filing with the Securities and Exchange Commission.
“The way the transaction is structured we have several options of what to do with that business, “Â Lawrie told investors Tuesday in a call to discuss the HPE-CSC merger.
“Post-close all options, and I underscore the word ‘all options, ’ would be on the table. But that decision will be approached and looked at after we close the transaction, ” he added without specifics on what those options for CSC would be.
CSC and HPE expect to complete their transaction in March 2017.
The former Hewlett-Packard split in November 2015 into the personal computer systems and printer maker known as HP Inc. and the enterprise technology services provider HPE.
CSC and HPE announced the merger Tuesday to create a global information technology services company with close to $26 billion in projected annual sales under a Reverse Morris Trust transaction, the same deal structure Reston-based government contractor Leidos Holdings (NYSE: LDOS) is using for its combination with the information systems and global solutions segment of Lockheed Martin (NYSE: LMT).
A combined CSC-HPE enterprise services company would generate approximately $2.86 billion in U.S. public sector market revenue per year to represent approximately 11 percent of total sales per year, according to investor slides from CSC that describe that deal.
CSC retained its international public sector business after the separation of CSRA and generates approximately $700 million in revenue per year from government customers outside the U.S., according to a November investor day presentation from CSC.
CSRA forecasted $5.5 billion in pro forma revenue for its 2016 fiscal year that runs on a April-March basis and is scheduled to release full-year financial results after markets close Wednesday.
