CSC to merge with enterprise services segment of HPE to create $26bn business

Hewlett Packard Enterprise (HPE) is entering a ‘tax-free spin merge’ with service provider CSC.

The merger will see HPE ‘spin-out’ its services business and join up with CSC. Half of the newly formed company will be owned by HPE and CSC shareholders, and HPE claims the whole process will be completely tax free.

This new company will have annual revenues of $26bn, with 95 data centres and more than 5,000 clients in 70 countries.

“As a pure play, the combined company will be built to lead digital transformations using next-generation technology solutions from both companies," said CSC chairman, president and CEO Mike Lawrie.

"It will be able to operate independent of any single hardware provider, while partnering with the world’s leading technology providers, including HPE."

HPE says the merger will enable annual cost savings of $1bn in the first year, with completion expected in March 2017.

“For the combined CSC and Enterprise Services, this will create a new company that will be a pure-play global IT services leader. For customers, this means global access to world class offerings in cloud, mobility, application development and modernization, business process services, IT services, big data and analytics, and securities,” said HPE CEO Meg Whitman on the company’s earnings call.

With HPE’s 50 per cent stake in the new company, the firm will receive a tax free $1.5 billion cash dividend from CSC. HPE will also transfer $2.5 billion (£1.7bn) in debt.