copy &. paste from NYT.


$8 Billion Deal Said to Be in Works for Tech Company



By ANDREW ROSS SORKIN
and JENNY ANDERSON
Published: December 23, 2005

A consortium of investment firms is in talks to acquire Affiliated Computer Services, a technology outsourcing company with clients that include General Electric and McDonald's, for about $8 billion, people briefed on the negotiations said.

The group is led by the Texas Pacific Group and includes Bain Capital and the Blackstone Group, these people said. Silver Lake Partners had been part of the group, these people said, but recently dropped out.

A deal could be reached as early as next week, these people added, though they cautioned that several points had yet to be resolved and it was possible that the negotiations could drag on or collapse entirely.

The negotiations come as private equity firms, flush with cash, are showing an increasing interest in smaller and mid-size technology outsourcing firms, which, despite their size, compete against behemoths like International Business Machines and Electronic Data Systems for large contracts. Those long-term contracts, and the resulting stable cash flows, make the companies attractive takeover targets for equity firms, analysts said.

Earlier this year, a group of seven private equity firms paid $11.3 billion for SunGard. Another group that had included Texas Pacific recently held talks to acquire rival Computer Sciences Corporation, negotiations that eventually collapsed over price.

A spokeswoman for Affiliated Computer did not return a call seeking comment. A spokesman for Texas Pacific declined to comment as did spokesmen for Bain Capital and Blackstone Group.

Affiliated's core business is providing the data-processing infrastructure required by government and commercial clients to process payrolls, maintain financial records, operate computer-linked customer call centers, handle human resources data and scheduling shipments from suppliers.

It has also developed its capacity to provide information processing services to the health care industry, and expanded its portfolio this year by acquiring the human resources operations of Mellon Financial, company records show.

Domestic and international government contracts have long been a staple of Affiliated's client base - it operates in more than 100 countries - but transactions show that the company has been shifting away from federal contracts to focus on state and local governments and commercial clients.

In recent months, it has won contracts to develop an Internet-based Medicaid information management system for New Hampshire and to manage the health savings account program for Florida Blue Cross and Blue Shield. It has also joined with Microsoft in marketing a public safety software program to fire departments, according to a release.

Based in Dallas, the company was founded by Darwin Deason, its chairman and the holder of more than a third of its stock. Mr. Deason, 65, had previously served as the president of MTech, helping to build it into the largest supplier of financial data processing in the country.

Under the terms of the proposed deal, the consortium would pay about $62 a share for Affliated, which before yesterday's run up in its stock price, would have been a premium of about 15 percent. Shares of Affiliated rose $1.69, to $58.08, after it announced it had extended its contract to service Magellan Health Services.

Diana B. Henriques contributed reporting for this article.