Equifax Inc. (EFX) today announced that its subsidiary, Equifax Information Services LLC, has entered into a definitive asset purchase agreement with CSC Credit Services, Inc., a subsidiary of Computer Sciences Corporation (CSC), to purchase certain credit services business assets and operations of CSC.
The purchase price is $1.0 billion in cash. As a result of this transaction, Equifax expects to realize tax benefits from a step-up in the tax basis of the acquired assets having an estimated net present value of approximately $200 million over a 15-year amortization period. The closing of the transaction is expected to occur by year-end.
Headquartered in Houston, TX, CSC's credit services business provides consumer credit services and related information to banks, mortgage companies, retail establishments, the automotive industry, medical entities, utility companies and other users of financial and credit information. CSC owns consumer credit files in 15 U.S. states covering approximately 20 percent of the U.S. population. CSC has been Equifax's largest credit affiliate since 1988. Equifax has been processing CSC's credit information and selling those files nationally since that time.
Richard F. Smith, Equifax Chairman and CEO, commented, "We are extremely pleased to announce the signing of the agreement to acquire the CSC credit services assets. We have a long working history with CSC and believe the acquisition of these assets will be a catalyst for the long-term growth of our USCIS business unit. We anticipate that the transaction will generate incremental net operating revenue to Equifax in the range of $115 million to $125 million and EBITDA of $105 million to $110 million. The pending transaction is also expected to be solidly accretive to Equifax's adjusted earnings per share in 2013. We will use a portion of any increased earnings for additional investments in growth initiatives and infrastructure across our businesses."
Lee Adrean, Equifax CFO, said, "As a result of this transaction, our leverage initially will be modestly above our target range for net debt-to-EBITDA of 1.75 to 2.0, and we intend to focus the use of our free cash flow in 2013 on debt reduction rather than share repurchases in order to return to our target leverage. The combined icombined impact of the acquisition and the change in focus on the use of cash is expected to be accretive to adjusted earnings per share attributable to Equifax (a non-GAAP measure, excluding the impact of acquisition-related amortization expense and including the benefit of tax-deductible amortization) by approximately $0.45 to $0.50 per share in 2013. The additional investment in growth initiatives and infrastructure will partially offset this accretion by approximately $0.10 per share."
Completion of the transaction is subject to the expiration or termination of the applicable Hart-Scott-Rodino waiting period and other customary closing conditions. The purchase price is subject to further adjustment after closing for the actual amount of working capital acquired by Equifax and other specified matters; however, Equifax does not anticipate that any further adjustment will be material. The purchase agreement is not subject to any financing contingencies. Equifax intends to fund the cash purchase price using debt and available cash. On December 1, 2012, Equifax entered into a new $350 million, 364-day revolving credit facility with Bank of America, N.A., as administrative agent and a lender, JP Morgan Chase Bank, N.A., SunTrust Bank, and Wells Fargo Bank N.A., to supplement an existing $500 million senior revolving credit facility. The new credit facility is available for general corporate purposes including acquisitions.