HP to acquire EDS for $13.9 billion

HP and EDS have signed a definitive agreement under which HP will purchase EDS at a price of $25 per share or an enterprise value of approximately $13.9 billion. The terms of the transaction have been unanimously approved by the HP and EDS boards of directors.

The transaction is expected to close in the second half of calendar year 2008 and to more than double HP's services revenue, which amounted to $16.6 billion in fiscal 2007. The companies' collective services businesses as of the end of each company's 2007 fiscal year had annual revenues of more than $38 billion and 210,000 employees doing business is more than 80 countries.

HP intends to establish a new business group, to be branded EDS — an HP Company, which will be headquartered at EDS’s existing executive offices in Plano, Texas. HP plans that EDS will continue to be led after the deal closes by EDS chairman, president and CEO Ronald A. Rittenmeyer, who will join HP’s executive council and report to Mark Hurd, HP’s chairman and chief executive officer. HP anticipates that the transaction will be accretive to fiscal 2009 non earnings and accretive to 2010 GAAP earnings. Significant synergies are expected as a result of the combination.

Acquiring EDS advances HP's stated objective of strengthening its services business. The specific service offerings delivered by the combined companies are: IT outsourcing, including data center services, workplace services, networking services and managed security; business process outsourcing, including health claims, financial processing, CRM and HR outsourcing; applications, including development, modernization and management; consulting and integration; and technology services. The combination will provide extensive experience in offering solutions to customers in the areas of government, healthcare, manufacturing, financial services, energy, transportation, communications, and consumer industries and retail.

Under the terms of the merger agreement, EDS stockholders will receive $25.00 for each share of EDS common stock that they hold at the closing of the merger. The acquisition is subject to customary closing conditions, including the receipt of domestic and foreign regulatory approvals and the approval of EDS's stockholders.

The company made this announcement during the trading hours today, 14 May 2008.