- The Washington Times - Saturday, December 14, 2002

DynCorp, one of the largest government contractors in the Washington area, will be bought by California competitor Computer Sciences Corp. for about $950 million, the companies announced yesterday.

The Reston company was seeking a buyer because it wasn't big enough to compete for wide-ranging government contracts, President and Chief Executive Paul V. Lombardi said during a conference call.

"We simply could not be a consolidator. Contracts require a diverse set of competencies, and only large, multifaceted companies with large skills can be successful," he said.

DynCorp has about 23,000 employees, including 4,500 in the Washington area. The company will be folded into Computer Sciences' Falls Church-based federal division, which has about 15,000 employees.

Computer Sciences has about 65,000 employees worldwide.

Executives said layoffs will be necessary as offices are consolidated, but a DynCorp spokesman said it is too early to tell how many jobs might be cut.

The deal is subject to shareholder approval. The boards of directors of both companies have signed off on the acquisition, which is expected to be finalized during the first three months of 2003, executives said.

The terms of the deal include payment of $15 in cash and stock valued at $43 for each share of privately held DynCorp, executives said. Computer Sciences also will assume about $273 million of DynCorp debt.

Shares in Computer Sciences closed yesterday at $32.91 on the New York Stock Exchange, down 1.76 percent from the previous day.

DynCorp, formed in 1946 by pilots returning from World War II, sells services including personal security and aircraft maintenance and is developing an anthrax vaccine. The company is 85 percent owned by its employees.

It had $2.3 billion in revenue for the fiscal year that ended in September. Major clients include the Defense and Justice departments and the Centers for Disease Control and Prevention.

Computer Sciences, which is based in El Segundo, Calif., is one of the world's largest information technology consulting companies. It had revenue of $11.4 billion for the fiscal year ended in March. Major customers include the Defense and State departments and the FBI.

There are few overlaps between the two companies, said Paul M. Conofi, president of Computer Sciences' federal sector.

"What was really attractive about this combination was we actually complement each other," he said.

Computer Sciences was interested in DynCorp because it wants to broaden its services to combat terrorism, executives said.

Demand for security services is expected to rise as the United States boosts its defenses against terrorism, said Van B. Honeycutt, Computer Sciences' chairman and chief executive.

"Spending on security is rising rapidly at the moment. Security concerns haven't subsided since September 11. If anything, the threat of terrorism is perceived to be growing," said Andrew Chambers, an analyst at Commerzbank Securities in London.

Computer Sciences executives said it will add to earnings in fiscal 2004 before costs related to the purchase.

The company will get about $6 billion in annual sales from the federal government and have almost 38,000 people working for U.S. agencies after the purchase.

This article is based in part on wire service reports.

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