Shares of Hewlett-Packard Enterprise Company HPE have been gaining solid momentum since last month. One of the major reasons behind this is could be management’s decision to spin off the Enterprise Services business and merge it with Computer Sciences Corporation CSC.
The deal will combine Computer Sciences’ strength in insurance, healthcare and financial services with Hewlett Packard Enterprise’s expertise in fields such as transportation, pharma, technology, media and telecom. Post the merger, the combined entity will become the world’s second-largest IT services company after Accenture plc ACN, generating revenues of approximately $26 billion annually.
The combined company is expected to generate cost synergies worth $1 billion during the first year and record a run rate of $1.5 billion at the end of the same. Per the agreement, shareholders of each of the companies will own about 50% of the combined company.
This merger is expected to enable Hewlett Packard Enterprise to focus better on faster-growing businesses and unlock value for shareholders.
The company announced the merger proposition on May 24. Since then, its shares have surged approximately 19%. Year to date, the stock has gained over 27%.
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