2010EDS to Buy Structural Dynamics, Unigraphics Stake for $1.12 Billion
By Elliot Spagat
Published in The Wall Street Journal
May 24, 2001
Electronic Data Systems Corp. agreed to buy software maker Structural Dynamics Research Corp. for $950 million as well as pay $170 million for the 14% of Unigraphics Solutions Inc. that it doesn't already own. The combined $1.12 billion price tag makes it one of EDS's largest deals and its third big acquisition in three months since Richard H. Brown became chairman and chief executive officer in January 1999. Mr. Brown, an active deal maker in previous jobs, had spent much of his first two years at EDS on a restructuring effort during which he laid off about 15,000 employees and replaced most top executives.
EDS, of Plano, Texas, agreed to pay $25 a share for SDRC, based in Milford, Ohio, a 42% premium to Wednesday's closing price;and $27 a share for the stake in Unigraphics, of St. Louis, a 27% premium to Wednesday's close.
EDS, the No. 2 computer-services company in the U.S., behind International Business Machines Corp., said the acquisitions will be "slightly" negative to earnings in the fourth quarter and next year and that it would take a "modest" one-time charge in the quarter, when the SDRC acquisition is completed. EDS expects to complete both deals around the end of the third quarter, subject to regulatory approvals.
SDRC, which had $452 million of revenue last year, makes software for manufacturers to design products over the Internet for clients such as Ford Motor Co. and Nissan Motor Co. SDRC operations will be folded into a new business unit at EDS, which, Mr. Brown said, is expected to have more than $1 billion in revenue next year. He expects the business to increase revenue by 16% to 20% a year for five years. To finance the deal, EDS plans to assemble a $2 billion package of debt and "equity-type products" by the beginning of the third quarter, said James E. Daley, chief financial officer.
The financing package would also pay for Mr. Brown's other recent acquisitions. In March, EDS agreed to buy most of Sabre Holdings Corp.'s outsourcing and software unit for $670 million. Two weeks later, EDS agreed to buy German computer-services company Systematics AG for $570 million, the company's largest European acquisition to date.
Mr. Brown said EDS would continue to be "opportunistic" in pursuit of acquisitions.
At 4 p.m. on the New York Stock Exchange Wednesday, before the deal was announced, EDS shares fell six cents to $64.78 in composite trading, while Unigraphics rose six cents to $21.31. In 4 p.m. Nasdaq Stock Market trading, SDRC shares fell 48 cents to $17.56. Greenhill & Co. and Dresdner Kleinwort Wasserstein advised EDS, while Sonenshine Pastor & Co. and Bear Stearns Cos. worked with Structural Dynamics.
Separately, EDS agreed to sell the Canadian hardware-resale business it bought from WorldCom Inc. two years ago to a group of private investors led by an EDS executive. EDS didn't disclose financial terms, other than to say that the price would be about book value of the unit's net assets. The unit, EDS Innovations, had $420 million in revenue last year. EDS said the sale, expected to be completed in June, won't affect per-share earnings this year.
EDS Innovations President Hubert Kelly is leading the buyer group, which plans to keep all 1,400 employees at 40 locations in Canada.