CA backs off CSC takeover bid

After several weeks of escalating hostilities between the two companies, Computer Associates International Inc. today announced that it would not pursue its proposed $9.8 billion acquisition of systems integrator Computer Sciences Corp.

In a statement released this morning, CA said it would let its unsolicited $108 all-cash-tender offer for CSC expire at midnight on March 16. The decision follows a series of actions by CSC designed to make a hostile takeover unwelcome and unprofitable, including huge compensation packages for its top executives in the event of an acquisition and a series of lawsuits challenging CA's tactics.

"These actions, together with the likelihood of a protracted battle, are unhealthy for CSC, CA and the technology industry that has served us both so well," said CA chief executive officer Charles B. Wang in a letter to CSC chairman and CEO Van B. Honeycutt.

Among other issues, CSC officials questioned whether, in the event of a merger, CA's international connections would compromise CSC's ability to continue serving customers in some areas of the Defense Department and the intelligence community. CA has denounced such allegations as unfounded.

CSC has fought the acquisition, charging that the bid does not reflect the full value of the company and that an acquisition by CA, a software company, would compromise CSC's position as an independent IT solutions provider in outsourcing and other services deals."This neutrality would be severely compromised if CSC were to be acquired by CA, and as a result, we would lose substantial credibility in the marketplace," Honeycutt said in a letter to CA officials last month.

"You have already stated publicly that you would redirect the efforts of many CSC employees to sales and service of CA's software products—- a prospect that both our customers and employees would find unacceptable," Honeycutt said.

Wang said CA management continues to have "great respect for CSC's managers, employees and clients" and said CA hopes to extend its business partnership with CSC going forward. CSC has a global licensing agreement with CA for its Unicenter software, which provides tools for managing desktop computers and other elements of large enterprise computing environments.

However, Wang also challenged CSC's allegations early on that no negotiations had taken place before CA announced its intention to acquire CSC on Feb. 11. Wang's letter details several meetings between CA and CSC officials and the basic elements of their negotiations.