Computer Sciences Corp., the giant California computer services company, is trying to sell part of DynCorp, the Reston-based contractor it bought last year as an entree into the homeland security market, sources familiar with the deal said.
CSC bought DynCorp, then a $2.3 billion business with 23,000 employees, in March 2003 for about $950 million. It is trying to sell off its DynCorp International operations, whose employees serve as bodyguards for Afghan President Hamid Karzai, distribute military supplies out of warehouses in Iraq, have worked as armed guards for U.S. military installations in Qatar and have trained Kuwaiti troops to become a self-sufficient fighting force.
After the acquisition, CSC quickly merged its operations with the DynCorp units that link computer systems, build communications networks and modify software. Those units generated about two-thirds of DynCorp's revenue. But CSC let the rest of DynCorp operate separately as DynCorp International.
DynCorp International has been on the block since early this year, but CSC has solicited formal offers only in the past two weeks, said an industry executive familiar with the situation.
The proposed sale comes at a time when abuse of prisoners at Abu Ghraib prison, and allegations of contractor involvement, have focused intense scrutiny on contractors who perform security and intelligence work.
Paul M. Cofoni, the president of CSC's federal business, declined to comment. The sale was first reported by mergermarket.com, a subscription-based mergers and acquisitions Web site.
CSC has hired Goldman Sachs to manage the sale, and the investment bank has found four or five potential buyers, according to the source familiar with the sale plans. Mergermarket quoted a source as saying likely bidders include Boeing Co., Lockheed Martin Corp., Northrop Grumman Corp. and Raytheon Co.
Raytheon considered buying DynCorp before it was snatched up by CSC last year, according to a source familiar with the discussions. A Raytheon spokesman declined to comment.
Tom Jurkowsky, a spokesman for Lockheed Martin, declined to comment, citing a company policy against commenting on mergers, acquisitions or divestitures. But a person with knowledge of the situation said Bethesda-based Lockheed looked into buying the unit but lost interest about a month ago because the businesses did not fit with its current work.
Randy Belote, a spokesman for Northrop Grumman, and Anne Eisele, a spokeswoman for Boeing, declined to comment. Goldman Sachs also declined to comment on the proposed sale.
CSC, based in El Segundo, Calif., had little if any business in overseas intelligence and security for the U.S. military before it acquired DynCorp, which was founded by former World War II pilots. DynCorp began as a cargo shipping company and transported materiel for the U.S. military during the Korean War.
In the short term, a DynCorp International sale would probably slow down growth at CSC. Operations supporting the military in the Middle East, many of them conducted under former DynCorp contracts, are the fastest-growing part of CSC's business, according to Cofoni. Excluding DynCorp, CSC has grown only slightly.
CSC reported sales of $11.3 billion in its last full fiscal year, ended March 28, 2003.
The company's commercial business slipped 1 percent in constant currency in its third fiscal quarter, ended Jan. 2. Its federal business jumped 84 percent in the same period. Its third-quarter earnings were $128.4 million on revenue of $3.6 billion, up from $105.7 million on $2.8 billion in the same period in 2003.
Shares of CSC closed at $39.49 yesterday, down 4 cents, on the New York Stock Exchange.