Electronic Data Systems (EDS) has agreed to sell its product data management, collaboration and design software business to three private equity firms for US$2.05 billion in cash as it moves to slash its debt and focus on its core outsourcing operations.
The company said Sunday that its UGS PLM Solutions business was being acquired by equity firms Bain Capital, Silver Lake Partners and Warburg Pincus.
The decision was highly anticipated, as EDS said last October that it planned to divest the unit through an initial public offering (IPO) or private sale in order to concentrate on its outsourcing business, which has taken a hit in recent quarters. The company's outsourcing business has been most notably dogged by problems relating to a huge U.S. Navy contract, which is being investigated by the U.S. Securities and Exchange Commission (SEC) and spurred the company to take a US$559 million dollar write-off in its fourth-quarter.
EDS executives have recently said, however, that the Navy contract has been "stabilized" and the company is working to strengthen its outsourcing operations.
While UGS PLM Solutions had been a solid contributor to the company's growth, it is "clearly outside of our core focus," EDS Chief Financial Officer Bob Swan said in a statement released Sunday.
The sale will also allow the company to cut its debt load. According to the company's fourth-quarter 2003 financial statements, EDS ended the year with almost US$3.5 billion in long-term debt, in addition to US$1.5 billion in other liabilities.
UGS PLM Solutions' sale price is 2.3 times the unit's annual revenue, EDS said. The business generated $897 million in revenue and $104 million in net income last year, according to the company.
The transaction is due to close within 90 days, pending customary closing conditions. UGS PLM Solutions employs approximately 5,000 people. A U.K. representative for the company could not comment further on the deal Monday, including the status of UGS PLM's employees.