Hewlett Packard Enterprise (HPE) today announced decision to divest its Enterprise Services business and merge with CSC.
Recently, Dell, one of the rivals of HPE, announced its deal to sell IT services business called Dell Services to NTT DATA for nearly $3 billion in cash.
The combined CSC and HPE’s Enterprise Services business will have annual revenues of $26 billion and more than 5,000 clients in 70 countries.
The new company is expected to produce first-year synergies of approximately $1 billion, with a run rate of $1.5 billion by the end of year one.
CSC and HPE shareholders each will own approximately 50 percent of shares in the new company.
“The spin-merger of HPE’s Enterprise Services unit with CSC is the right next step for HPE and our customers,” said Meg Whitman, president and chief executive officer of Hewlett Packard Enterprise.
Mike Lawrie, chairman, president and chief executive officer of CSC, said: “Together, CSC and HPE’s Enterprise Services will have the scale, foundation and next-generation technologies to innovate, compete and grow in a rapidly changing marketplace.”
Mike Lawrie will head the new company, and Meg Whitman will join the Board of Directors. The new company’s board will be split 50/50 between directors nominated by HPE and CSC.
The transaction is expected to deliver approximately $8.5 billion to HPE’s shareholders. This includes an equity stake in the newly combined company valued at more than $4.5 billion, which represents approximately 50 percent ownership, a cash dividend of $1.5 billion, and the assumption of $2.5 billion of debt and other liabilities.
HPE with $33 billion in expected annual revenue, will focus on software-defined infrastructure that leverages servers, storage, networking, converged infrastructure, as well as its Helion Cloud platform and software assets.