ACS confirms Cerberus dropped buyout bid

ACS confirms Cerberus dropped buyout bid

	Published : Wed, 31 Oct 2007 22:20 By : Agencies Print this Story

DALLAS (AP) - Cerberus Capital Management LP cited weak debt markets for its decision to drop a $6.2 billion buyout offer for Affiliated Computer Services Inc.

ACS confirmed Cerberus' decision in a regulatory filing Wednesday.

In a letter attached to the filing, Cerberus managing director W. Brett Ingersoll told some ACS directors that the private equity firm was impressed with ACS and still believed it was an attractive investment.

'We regret that we must withdraw our offer to acquire the company due to the continuation of poor conditions in the debt financing markets,' Ingersoll said in the letter dated Tuesday.

Ingersoll told a special committee of the ACS board that his firm believes it could have won ACS shareholder approval for the sale if the committee had stuck to the timetable set out by Cerberus. He left open the possibility of another transaction with ACS.

Shares of ACS fell 19 cents to $50.66 after dropping as low as $49.60 Wednesday.

Analysts said investors had already given the deal little chance of success, as shown by ACS stock trading well below the buyout price of $62 per share. The shares have been sinking from their 52-week high of $61.67 since April.

Cowen and Co. analyst Moshe Katri said Cerberus' withdrawal eliminated uncertainty and would improve the outlook for signing commercial customers.

Citigroup analyst Ashwin Shirvaikar said the deal's collapse would put pressure on ACS to return cash to shareholders, probably by repurchasing shares.

ACS was scheduled to report financial results for the July-September quarter Thursday.

In March, Cerberus and ACS founder and Chairman Darwin Deason announced an offer for $59.25 per share. They raised the bid in April to $62 per share, or about $6.2 billion. In June, ACS agreed to pay Cerberus $7.5 million for the right to solicit other bids for two months.

Deason controls 41.6 percent of ACS voting stock through ownership of preferred shares.

Dallas-based ACS handles back-office functions and technology help for other companies and government agencies. It earned $253 million on sales of $5.77 billion in its most recent fiscal year, which ended June 30.

The company has also been dealing with a Securities and Exchange Commission investigation into its granting of stock options.

Last year, the chief executive and top financial officer resigned. ACS said the pair manipulated grant dates for stock options, violating the company's ethics code.