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Technology services giant EDS Corp. moved Tuesday to boost its government IT business, striking a deal to buy a controlling stake in Saber Holdings Inc. for $420 million in cash. Portland, Ore.-based Saber provides software and consulting services to state and local government agencies. The company, founded in 1997, has operations in 35 states, selling tools to assist in voter registration, election management, public health services, motor vehicle registration and unemployment insurance. Terms call for Plano, Texas-based EDS to buy the 93% stake in Saber held by Menlo Park, Calif., private equity firm Accel-KKR LLC. Saber executives Nitin Khanna and Karan Khanna will retain their 7% interest and continue to lead the company after the deal closes, which is expected by year's end. EDS does not expect the transaction to materially affect 2008 earnings. Though EDS, which Ross Perot founded in 1962 and had 2006 sales approaching $20 billion, is perhaps known as a provider of corporate outsourcing services, the company also has a large and growing business serving government clients. The company in 2006 generated $3.3 billion, or about 16% of its revenue, from U.S. government clients and said it believes the Saber deal will help fuel growth in that segment. "Saber brings complementary capabilities to EDS' already strong presence in the U.S. state and local government market," EDS executive vice president Joe Eazor said in a statement. "The combination of Saber's industry-leading applications portfolio, geographic breadth and deep understanding of government technology needs, together with EDS' global resources and demonstrated strengths in systems integration, will provide unmatched, end-to-end solutions for clients." Officials from Accel-KKR, which invested in Saber in January 2006, would not disclose the buyout firm's return from the sale or details of its original investment. The firm injected an additional $40 million in Saber in June 2006 to fund the company's purchase of government services assets from Covansys Corp. of Farmington Hills, Mich. That purchase appears to have been a critical step for Saber, more than doubling the company's employment, adding $75 million in revenue and taking the company above the $100 million mark for the first time. The Covansys business also broadened Saber's offering, adding motor vehicle and other service offerings to a company that had historically emphasized its election-related technology and consulting. Accel-KKR is an offspring of Palo Alto, Calif., venture capital firm Accel Partners and New York private equity firm Kohlberg Kravis Roberts & Co. Established in 2000 to invest in technology assets and businesses outside of each firm's core focus, its deals target small and midsize technology companies with revenue of $15 million to $150 million. Previous exits for Accel-KKR include a January 2006 sale of 3-D graphics software developer Alias, which it bought for $57 million in 2004 along with the PE arm of Ontario Teachers' Pension Plan, to Autodesk Inc. for $197 million. The firm around the same time sold retail software maker CRS Retail Systems Inc. to Epicor Software Corp. for $121 million after acquiring it in 2002 for $45 million.  Deal Video
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