Hpe hub banner.png

HPE to spin off its services business and merge it with CSC

Hewlett Packard Enterprise touts tax-free "spin merge" with CSC to create $26bn services giant

Hewlett Packard Enterprise (HPE) has announced plans for a "spin merge" with recovering services company CSC. The peculiar deal will see HPE spin-out its services business, merge it with CSC, then spin it off with HPE and CSC shareholders owning half of the newly formed company.

And HPE claims that the whole process will be completely tax-free.

The new company will have annual revenues of $26bn when the process is complete, with 95 data centres, and more than 5,000 clients in 70 countries. The merger, according to HPE, will enable annual cost savings of $1bn in the first year after completion in March 2017.

The announcement comes just six months after CSC split itself in two, with CSC serving commercial and government clients around the world, and CSRA focused purely on public sector clients in the US.

CSC chairman, president and CEO Mike Lawrie will retain his positions in the new company, while HPE's CEO, Meg Whitman, will join the new company's board of directors. Lawrie claimed that the deal was in the best interests of clients pursuing digital transformation.

"As a pure play, the combined company will be built to lead digital transformations using next-generation technology solutions from both companies," said Lawrie. "It will be able to operate independent of any single hardware provider, while partnering with the world's leading technology providers, including HPE."

Rump HPE, meanwhile, will still be able to boast some $33bn or so in annual revenues focused on security, software (especially software-defined infrastructure, the company was keen to assert) and a portfolio of servers, storage, networking, converged infrastructure, the Helion Cloud platform and various software assets.

Whitman's strategy, the merger presentation makes clear, is to leave behind an HPE that is number one or number two in a range of broad sectors, including servers, storage, cloud (where it claims first position in terms of infrastructure sales to cloud providers), networking and converged systems.

The merged CSC-HPE enterprise services business will take on $1.9bn of HPE debt, as well as $600m in pension liabilities. CSC will also transfer $1.5bn in cash to HPE. The two companies have pinned a nominal $8.5bn value on the transaction.

However, with HPE's record in mergers and acquisitions in recent years it's open to question as to whether that value will ultimately be realised.

HPE to spin off its services business and merge it with CSC

Hewlett Packard Enterprise touts tax-free "spin merge" with CSC to create $26bn services giant

Mergers

EU to decide fate of $14bn HPE-Juniper Networks merger next month

Law

US court clears Mike Lynch of fraud charges

Threats and Risks

Microsoft: Russian hackers are targeting other companies