EDS today announced it has agreed to purchase an approximate 93% equity interest in Saber Holdings, a leading provider of software and services to US state governments, from various sellers, including majority shareholder Accel-KKR, for approximately $420 million in cash.
Saber`s Chief Executive Officer Nitin Khanna and President and Chief Operating Officer Karan Khanna will retain an approximate 7% interest in Saber and continue to lead the company following the closing.
Saber, founded in 1997, is one of the world`s fastest-growing providers of software products and services that enable state and local governments to better serve citizens. The Portland, Oregon-based company, which has operations in 35 states, more than doubled its revenue each year since 2004.
Saber`s current product line includes market-leading software and services that underpin essential, federally funded government functions such as voter registration, election management, public retirement programmes, human services, public health services, motor vehicle registration and unemployment insurance.
"This transaction creates a growth opportunity for EDS as Saber brings complementary capabilities to EDS` already strong presence in the US state and local government market, and is consistent with our strategy to move aggressively into higher-value application services," said Joe Eazor, EDS executive vice-president, Corporate Strategy and Business Development.
"The combination of Saber`s industry-leading applications portfolio, geographic breadth and deep understanding of government technology needs, together with EDS` global resources and demonstrated strengths in systems integration, will provide unmatched, end-to-end solutions for clients," continued Eazor.
"The transaction with Saber demonstrates EDS` commitment to the US government sector and our strategy to provide mission-critical applications to the state and local government market," commented Dennis Stolkey, EDS vice-president and general manager, US Government. "Saber has an impressive track record of success in serving rapidly growing segments of the government market. They have a strong, dynamic management team along with a leverageable delivery model that fits well with EDS` strategic approach to serve the needs of state and local governments.
"EDS has collaborated with Saber on projects in the past, and we are well aware of the capabilities they bring to our partnership," said Stolkey. "We look forward to building on our already close relationship and the opportunity to help our government clients improve service to citizens, gain efficiencies in their work processes and reduce costs."
"At Saber, we cannot imagine having better clients than government organisations who themselves are committed to their citizens. As such, Saber has always been dedicated to providing government clients with customised software that enables them to serve their citizens quickly and efficiently. Augmenting this capability with products, services, assets and talent from EDS will allow Saber to provide clients with the comprehensive solutions that today`s sophisticated citizen demands," said Nitin Khanna, chief executive officer of Saber.
"We are delighted with our new relationship with EDS as we believe it will enable us to take our already successful business to the next level, while continuing to provide `white glove` service to our clients," said Karan Khanna, president and chief operating officer of Saber.
The state and local government market for IT services is a highly attractive growth segment valued at approximately $50 billion by research firm INPUT and is estimated to have a compound annual growth rate of nearly 8%, driven by modernisation of legacy systems and strong demand in new market segments for software and service solutions. Last year, approximately $3.3 billion, or 16%, of EDS` revenue came from US government clients.
The transaction, which is subject to termination of the Hart-Scott-Rodino antitrust waiting period, is expected to close before year-end. The acquisition is not expected to have a material impact on EDS` 2008 earnings, but is expected to be accretive to free cash flow in 2008.
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