DXC Technology Co. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by DXC Technology Company (DXC) on March 11, 2020, regarding events occurring on March 9, 2020. The filing discloses the entry into a Material Definitive Agreement to sell a specific business segment.
Key Financial Metrics and Transaction Terms
The filing details a divestiture transaction rather than standard periodic financial results. Key financial terms include:
- Transaction Value: Total cash consideration of $5,000,000,000 for the U.S. State and Local Health and Human Services (HHS) business.
- Price Adjustments: The purchase price is subject to adjustments for cash and cash equivalents (MMIS Entity Cash), indebtedness, and closing net working capital outside a specified collar.
- Termination Fee: The Purchaser is obligated to pay a termination fee of $250,000,000 in cash under specified conditions.
- Financing: The Purchaser has secured equity financing commitments from Veritas Capital Fund VI and VII, along with debt financing from several financial institutions.
The filing text does not provide specific values for DXC's overall revenue, profit, cash flow, margins, or total debt for the period, as this report focuses solely on the transaction agreement.
Material Changes and Transaction Conditions
The primary material change is the agreement to divest the HHS Business. The closing of the transaction is subject to several conditions:
- Expiration or termination of waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
- Absence of any governmental injunction preventing the closing.
- Accuracy of representations and warranties by both parties.
- Absence of a material adverse effect on the HHS Business.
- Ability to convey HHS customer contracts generating 87.5% or more of aggregate revenue for the nine-month period ended December 31, 2019, without additional customer consents.
DXC has agreed to a three-year non-compete and non-solicitation covenant regarding the HHS Business and its key employees following the closing.
Outlook, Risks, and Unusual Items
The transaction is expected to close by December 31, 2020, subject to the conditions listed above. A Transition Services Agreement will be executed at closing, under which DXC will provide operational separation services without charge and other transition services at cost, subject to a cap.
Management notes that forward-looking statements are subject to risks and uncertainties, including those detailed in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2019, and the Quarterly Report on Form 10-Q for the period ended December 31, 2019. No assurance is given that the transaction will be completed or that goals will be achieved.
Investor Verification Checklist
- Verify the final closing date and whether the December 31, 2020, deadline is met.
- Confirm the final purchase price after adjustments for cash, debt, and working capital.
- Monitor regulatory approvals, specifically regarding the Hart-Scott-Rodino Act and customer contract consents.
- Review the Transition Services Agreement terms to understand ongoing operational costs and liabilities.
- Check for any material adverse effects on the HHS Business that could trigger termination.