Report: CACI, Booz Allen Hamilton, Leidos Talking Deal For CSC's Public Sector Business

CACI International, Booz Allen Hamilton Holdings and Leidos Holdings each has held exploratory talks to buy CSC's public sector division, according to a Thursday report from Reuters.

Discussions between CSC and the three government IT contractors are in the early stages and may not come to fruition, but were initiated after CSC said it would split into two businesses, according to the report.

CSC declined to comment. CACI, Booz Allen Hamilton and Leidos did not immediately respond to a request for comment.

[Related: Report: HP Passed On CSC Buyout Deal]

CSC said during its earnings call May 19 that it will split into two publicly traded businesses, one focused on its $8.1 billion commercial business and the other focused on its $4.1 billion U.S. government offerings. The Falls Church, Va.-based solution provider expects the split to be finalized Oct. 25. CSC is No. 4 on CRN's 2014 Solution Provider 500 list.

CSC's North American public sector division provides services to the U.S. Department of Defense and civil agencies of the federal government.

Gard Little, an analyst for research firm IDC, said the North American public sector business of CSC is attractive and valuable to a select group of service providers because of the high barriers of entry for competitors as well as its great margins.

"I think that the CSC government business is a very attractive asset," Little told CRN. "I'm not surprised that folks are expressing interest because there has been a [great deal] of interest in the North American public sector business. I don’t think the value of [the North American public sector business] has changed because of the intent to split. The market sees the two parts being greater individually than combined because they bid up the price upon the announcement of the split. I don't think the value of [the North American public sector business] has changed all that much since the announcement. "

Buyout rumors have been following CSC for quite some time and have been heating up over the past year.

Reports emerged in late September that the company was exploring leveraged buyout options with multiple private equity firms, including Blackstone Group and Bain Capital.

In late February, Reuters reported that CSC was being pursued for a sale to private equity firm Carlyle Group and fellow solution provider behemoth Capgemini.

Bloomberg reported Thursday that HP had been in buyout talks with the solution provider for several months and was "nearing a deal" before pushing away from the table. The report said HP does not intend to reopen buyout discussions with CSC.

PUBLISHED JUNE 5, 2015