Equifax Inc. (NYSE: EFX) today announced that its subsidiary, Equifax Information Services LLC, has entered into a definitive asset purchase agreement with CSC Credit Services, Inc., a subsidiary of Computer Sciences Corporation (NYSE: CSC), to purchase certain credit services business assets and operations of CSC.

The purchase price is $1.0 billion in cash.  As a result of this transaction, Equifax expects to realize tax benefits from a step-up in the tax basis of the acquired assets having an estimated net present value of approximately $200 million over a 15-year amortization period.  The closing of the transaction is expected to occur by year-end.

Headquartered in Houston, TX, CSC’s credit services business provides consumer credit services and related information to banks, mortgage companies, retail establishments, the automotive industry, medical entities, utility companies and other users of financial and credit information. CSC owns consumer credit files in 15 U.S. states covering approximately 20 percent of the U.S. population. CSC has been Equifax’s largest credit affiliate since 1988. Equifax has been processing CSC’s credit information and selling those files nationally since that time.

Richard F. Smith, Equifax Chairman and CEO, commented, “We are extremely pleased to announce the signing of the agreement to acquire the CSC credit services assets.  We have a long working history with CSC and believe the acquisition of these assets will be a catalyst for the long-term growth of our USCIS business unit.  We anticipate that the transaction will generate incremental net operating revenue to Equifax in the range of $115 million to $125 million and EBITDA of $105 million to $110 million. The pending transaction is also expected to be solidly accretive to Equifax’s adjusted earnings per share in 2013.  We will use a portion of any increased earnings for additional investments in growth initiatives and infrastructure across our businesses.”

Source:  Equifax Press Release

Comments from the Street: According to CSC and Equifax, the division is the largest independent consumer credit reporting agency in the United States, and has had a business relationship with Equifax for more than two decades. It covers 15 states in the Midwest and central U.S., and represents around 20% of the country’s population. CSC said the unit is expected to post $230 million in revenue, $100 million in operating income, and $0.40 in EPS for 2012.

CSC said it would net around $750 million to $800 million from the sale after taxes, and use the proceeds mostly for share repurchases and pension plan contributions. Equifax expects the acquisition will bring in net operating revenue of $115 million to $125 million, and EBITDA of $105 million to $110 million.

Source:  The Motley Fool