EDS Sets Sights on Mynd

Columbia, SC-based Mynd, until this week known as Policy Management Systems Corporation, says it has received a purchase overture from EDS, the Texas technology firm. The deal would reportedly be worth between $637 million and $708 million. In its announcement, Mynd shared the contents of a letter from Richard Brown, EDS chairman and CEO, to the former PMSC's board.

The letter begins, "Since I joined Electronic Data Systems Corporation in January of 1999 we have taken several steps to continue to grow EDS as a leading global provider of IT services. Our strategy has been to provide the full range of IT capabilities (e.g., systems integration, consulting, outsourcing) across vertical industry markets with local delivery capabilities. While the equity markets have viewed this focus quite favorably, we recognize that, under the right circumstances, the best strategy may be to acquire companies that have strong capabilities in particular vertical markets.

"EDS has a keen interest in the insurance market and sees tremendous potential in leveraging our existing IT and outsourcing skills in this industry. Our internal work indicates that Policy Management Systems Corporation offers excellent capabilities to assist us in capturing this opportunity. Accordingly, we have followed with great interest your recent announcement with Welsh, Carson, Anderson & Stowe and believe that we can offer your shareholders a more compelling proposal."

EDS's Brown wrote that, based on his firm's preliminary review of publicly available information, its board has authorized a proposal to buy all of the outstanding common stock of PMSC for $18 to $20 per share, in cash. "Because of our limited access to information, this range does not reflect the additional synergy value we may find in due diligence, which could allow us to improve our proposal," Brown wrote.

He cited what he saw as several advantages over the transaction with Welsh Carson:

• The EDS proposal offers shareholders a premium of approximately 30 percent to 40 percent over the current offer and approximately 50 percent to 67 percent over the current trading price;
  
• The EDS proposal is 100 percent for cash;
  
• The EDS proposal is for 100 percent of the outstanding shares;
  
• The EDS proposal is not subject to any financing conditions; and
  
• The EDS proposal can be closed more quickly than the proposed Welsh Carson transaction. Effected by means of a cash tender offer, it can be closed three to four months prior to the existing deal.

Brown said that beyond shareholder issues, EDS believes its proposal works well for PMSC's other stakeholders, as well. "I recognize… the additional responsibility that directors quite properly feel toward employees, management, the community and customers being served," Brown wrote. "With this in mind, I am pleased to provide comfort on all of these points.

• The EDS proposal provides a broader platform and greater opportunities for your employees and management team. We recognize the substantial contribution that has been made by your employees and management team, and would intend that all employees and substantially the entire management team join the EDS family;
  
• The EDS proposal envisions maintaining PMSC's strong presence in the State of South Carolina, and increasing such presence by moving other complementary EDS operations into the State;

"EDS is very interested in PMSC and believes that our proposal should be compelling to your shareholders and advisors," he added. "While at this time our proposal is necessarily preliminary and non-binding, we are prepared to proceed immediately to perform due diligence and to make a binding offer. We currently believe we could complete our due diligence and the negotiation of mutually agreeable definitive agreements in a period of ten days to two weeks. To facilitate this process, we are prepared to use the Welsh, Carson, Anderson & Stowe documents as a basis for our negotiations.

Mynd says its board authorized the company and its advisors to explore this proposal with EDS.

On March 30, 2000, Mynd signed a merger agreement with an affiliate of Welsh, Carson, Anderson & Stowe which provides that stockholders will have the right to elect to either retain their shares or to receive $14 per share in cash, subject to between 75 percent and 93 percent of the existing shares being converted to cash.