LONDON, UK / ACCESSWIRE / April 4, 2017 / Active Wall St. blog coverage looks at the headline from Hewlett Packard Enterprise Co. (NYSE: HPE) and Computer Sciences Corp. (NYSE: CSC). Hewlett Packard Enterprise announced on April 03, 2017, that it has successfully completed the previously announced separation of its Enterprise Service business and merged it with Computer Sciences Corporation, hence creating DXC Technologies, Ltd. The spin-off was initially proposed on March 02, 2017, where the enterprise service business would be referred to as Everett Spin Co., Inc. Register with us now for your free membership and blog access at:
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Prospects of the Agreement
The transaction is expected to deliver about $13.5 billion in value to HPE and its stockholders on an after-tax basis. The amount includes an equity stake in DXC for HPE's stockholders, a cash dividend payment to HPE and DXC's assumption of debt and other liabilities. Post the close of this transaction, HPE's stockholders are set to approximately 0.086 shares of common stock in the new Company for each share of HPE's common stock that they hold on the applicable record date.
Currently, 50.1% of the outstanding shares of DXC's common stock are now held by pre-merger HPE's stockholders and approximately 49.9% of the outstanding shares of DXC's common stock have been issued to pre-merger CSC's stockholders. The total value of the equity for HPE's stockholders is valued at approximately $9.5 billion. Additionally, HPE is entitled to receive a $3 billion special cash payment with $1.5 billion earmarked for the retirement of existing debt. DXC assumed $600 million of net pension liability and $400 million of existing debt, consistent with the previous descriptions of the transaction structure.
The Revamped Financial Outlook
Owing to the successful separation of Enterprise Services Business, HPE is set to adjust its financial outlook to reflect the partial year contribution from Enterprise Services, since it will no longer contribute to HPE financials. HPE is adjusting its Q2 and full-year FY17 outlook in connection with today's announcement. The Enterprise Services transaction is set to impact HPE's FY17 diluted net EPS by about $0.08, including ES-related stranded costs.
HPE now expects Q2 FY17 non-GAAP diluted net EPS to be in the range of $0.33 to $0.37 from its previous outlook of $0.41 to $0.45. It also expects full-year FY17 non-GAAP diluted net EPS to be in the range of $1.46 to $1.56, from the previous outlook of $1.88 to $1.98.
Unification of HPE's Business
The spin-off agreement is set benefit the more strategically focused HPE which is now well positioned to adapt to the rapidly changing market. HPE is set to execute a definite strategy on the basis of three key pillars, which are:
1. Making hybrid IT simple through secure, software-defined offerings, thus enabling customers to move data seamlessly across data centers and public and private cloud environments;
2. Redefining IT outside of the data center by powering the emerging intelligent edge that will run campus branch, and industrial IoT applications;
3. Delivering world-class expertise and flexible consumption models to help customers transform their IT environments.
HPE Growth Prospects
HPE recently acquired Nimble Storage, the San Jose, the California-based provider of predictive all-flash and hybrid flash storage solution, on March 07, 2017. HPE paid $13.50 per share in cash, representing a net purchase price at closing of $1.0 billion. This acquisition allowed HPE to tap into the highly growing flash market with $15 billion net markets in 2016 with an expected $20 billion by 2020. The transaction enabled HPE to deliver a full range of superior flash storage solutions to customers across multiple segments.
On Monday, April 03, 2017, the stock closed the trading session at $17.57, tumbling 25.86% from its previous closing price of $23.70. A total volume of 31.89 million shares have exchanged hands, which was higher than the 3-month average volume of 10.69 million shares. The Company's shares are trading at a PE ratio of 9.53 and have a dividend yield of 1.48%. At Monday's closing price, the stock's net capitalization stands at $29.31 billion.
At the closing bell, on Monday, April 03, 2017, Computer Sciences' stock ended the trading session flat at $69.01. A total volume of 5.46 million shares were traded at the end of the day, which was higher than the 3-month average volume of 1.88 million shares. Computer Sciences' stock price surged 16.05% in the last three months, 32.66% in the past six months, and 103.42% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have rallied 16.38%. The stock currently has a market cap of $9.95 billion and has a dividend yield of 0.81%.
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