Cerberus Lets ACS Talk

 NEW YORK (AP) – Affiliated Computer Services Inc. said Sunday the investment team trying to buy the information technology outsourcer agreed to let the company seek a better offer, potentially opening the door to higher bids.

The Dallas-based company in March said its chairman and biggest shareholder, Darwin Deason, teamed with Cerberus Capital Management to offer $59.25 per share cash for the shares Deason does not already own. That offer was later raised to $62 per share.

On Sunday, ACS said Deason and Cerberus Capital agreed to waive an exclusivity agreement that prevented the company from flirting with other suitors. Under the waiver, ACS and its financial adviser, Lazard Freres & Co., can test the waters to see whether anyone else is interested in buying the company.

ACS will pay Cerberus $7.5 million to reimburse some of the expenses for launching the bid, plus a $15 million breakup fee if the original agreement falls through.

With $5.35 billion in revenue last year, ACS helps companies outsource services like personnel, accounting and technical support. The company's stock closed Friday at $58.26, 6.4 percent below Cerberus' offer price.

Goldman Sachs analyst Julio Quinteros wrote in a client note “the potential for a higher bid than the currently outstanding $62 offer from Mr. Deason and Cerberus cannot be discounted.” The possibility of a sweeter offer will probably lift ACS' shares Monday, Quinteros said.

While Bank of America Securities analyst Abhishek Gami said the suspension of the exclusivity agreement means “there may be more to come,” he said there is more potential risk than reward.

Even if a “motivated bidder” were to try and outbid Cerberus and Deason, the upside beyond $62 is modest, he said. Meanwhile, if no deal closes the stock could fall to the low $50s, he said.