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Apollo and Kyndryl Reportedly Bidding for DXC Technology, Sources Tell Reuters

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Michael Chen

June 22, 2024 - 11:00 am

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Apollo Global and Kyndryl Holdings Eye Joint Bid for DXC Technology

Buyout firm Apollo Global and Kyndryl Holdings, the IT services provider spun off from IBM, are reportedly in talks about a potential joint bid for DXC Technology. Sources familiar with the matter revealed on Monday that discussions are ongoing regarding an acquisition offer for DXC in the range of $22 to $25 per share. This move by Apollo and Kyndryl highlights a significant interest in DXC, which itself is a prominent player in the IT services sector.

Potential Acquisition Details

The discussions between Apollo and Kyndryl have centered around an acquisition offer for DXC Technology valued between $22 and $25 per share, according to one of the sources. This valuation range reflects a premium over DXC's current market value and indicates the strategic importance both Apollo and Kyndryl place on acquiring DXC. A successful bid would mean a substantial investment from both entities, potentially reshaping the landscape of IT services providers.

DXC's Parallel Process to Sell Insurance Software Business

In addition to the potential acquisition bid from Apollo and Kyndryl, DXC Technology is also running a separate process to sell its insurance software business. This division is expected to fetch more than $2 billion, according to sources. The sale of the insurance software business aligns with DXC’s strategy to streamline its operations and focus on its core IT services. However, it also leaves open the possibility for DXC to remain an independent company under the leadership of Raul Fernandez, who was appointed chief executive in February.

Strategic Moves by DXC Technology

DXC Technology’s strategic move to sell its insurance software business reflects its focus on strengthening its primary IT services offerings. This potential divestiture would not only raise significant capital but also allow DXC to streamline its operations. The decision to either sell the business or pursue independence under CEO Raul Fernandez will significantly impact DXC’s future direction. Fernandez, known for his strategic vision, has been tasked with steering the company towards sustainable growth and enhanced shareholder value.

Confidentiality and Market Reactions

The sources who provided information about the ongoing discussions requested anonymity due to the confidential nature of the matter. Neither DXC Technology nor Kyndryl Holdings immediately responded to requests for comment. Apollo Global, known for its strategic investments, declined to comment on the potential bid. The market is closely watching these developments, as the outcome could have significant implications for the IT services sector.

Apollo Global's Strategic Investment Approach

Apollo Global is a well-known private equity firm with a reputation for strategic acquisitions and investments. Their interest in DXC Technology aligns with their investment strategy of acquiring undervalued or strategically important companies. If the bid materializes, it would represent a significant move by Apollo to expand its portfolio in the IT services industry. Apollo’s expertise in transforming acquired companies could bring substantial value to DXC’s operations and market positioning.

Kyndryl Holdings' Expansion Plans

Kyndryl Holdings, having recently been spun out of IBM, is looking to establish its presence in the IT services market. A joint bid with Apollo for DXC Technology would provide Kyndryl with a substantial boost in capabilities and market reach. The acquisition would likely enable Kyndryl to offer a broader range of services and enhance its competitive edge in the industry. This move is part of Kyndryl’s broader strategy to grow rapidly and establish itself as a leading IT services provider.

Implications for DXC Technology

For DXC Technology, the potential acquisition by Apollo and Kyndryl could bring significant changes. An acquisition could mean new strategic directions, investments in technology and services, and possibly a restructuring to align with the new owners' vision. Alternatively, if DXC opts to remain independent, the sale of the insurance software business would still provide substantial capital for reinvestment in core areas, potentially driving growth and innovation under CEO Raul Fernandez’s leadership.

Market Valuation and Shareholder Impact

DXC Technology currently has a market value of approximately $3 billion. The proposed acquisition offer of $22 to $25 per share represents a significant premium, which could be attractive to shareholders. This premium indicates the value that Apollo and Kyndryl see in DXC’s assets and market position. Shareholders will closely monitor these developments, as the outcome will directly impact their investments and the future value of their shares.

Future Prospects for the IT Services Sector

The potential acquisition of DXC Technology by Apollo and Kyndryl could have broader implications for the IT services sector. Such a significant move would likely trigger competitive responses from other major players in the industry. It could lead to further consolidation and strategic partnerships as companies strive to enhance their market positions. The integration of DXC’s capabilities with Kyndryl’s and Apollo’s resources could set new benchmarks for service delivery and innovation in the IT services market.

Conclusion

In conclusion, the ongoing discussions between Apollo Global and Kyndryl Holdings about a potential joint bid for DXC Technology represent a significant development in the IT services sector. The proposed acquisition offer reflects the strategic value seen in DXC’s assets and market position. Meanwhile, DXC’s parallel process to sell its insurance software business indicates a focused strategy to streamline operations and enhance core services. The market is closely watching these developments, as the outcome will have significant implications for DXC’s future and the broader IT services industry. Whether through a successful acquisition or a strategic divestiture, DXC Technology is at a pivotal moment that will shape its path forward under the leadership of CEO Raul Fernandez.