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Cerberus Capital Management LP has withdrawn its $6.2 billion buyout offer for Affiliated Computer Services Inc., according to a report, seven months after first striking an agreement. The New York investment firm withdrew its offer citing debt market conditions, the Wall Street Journal said Wednesday, citing a letter from Cerberus to the Dallas-based information technology and business process outsourcing company. Cerberus reportedly first met with ACS management in November 2006 and on March 20 struck a deal with board and its target's founder, Darwin Deason, who controls 42% of the ACS vote. The first offer was $59.25 per share, a 15.5% premium over the stock's then-last closing price. ACS tapped Lazard the same month to advise a special committee on the offer. Cerberus and ACS later signed an exclusivity agreement, which was suspended over the summer to allow the special committee to entertain other offers. The agreement expires Nov. 14. The $62 per share price came in late April. But in the months that followed, shareholder frustration bubbled up and credit markets tightened. OppenheimerFunds Inc. sent a letter Sept. 11 to the ACS' board expressing disappointment that it did not put the offer to a shareholder vote or consider other options that were suggested. The investor also pointed to concern that the target's business could suffer because the offer had been on the table for so long. The Journal's report also points to frustration from the company's largest shareholder, Pzena Investment Management, which holds a nearly 8.7% stake. Pzena reportedly tried to engage the special committee but got no response. In September ACS postponed its 2007 annual meeting--pushing it from early November to May 22, 2008--to give the special committee time to weigh options. The committee reportedly met Oct. 2 to do so. A source told The Deal in early October that it seemed the special committee had not responded fully to all diligence requests. Cerberus reported back in November 2006 that talks with management came shortly after others ended with a private equity consortium, which was rumored to include TPG, Bain Capital LLC and Blackstone Group LP. At the time, reports said the bidders had offered $62 per share but that ACS' board wanted $65. ACS shares closed down .51% Tuesday at $50.85 apiece on the New York Stock Exchange. ACS is the latest deal to hit the skids amid credit and shareholder turmoil. Bethpage, N.Y.-based Cablevision Systems Corp.'s $22 billion management-led buyout proposal was shot down by shareholders last week. Kohlberg Kravis Roberts & Co. and Goldman Sachs Capital Partners agreed to invest $400 million in Washington-based stereo equipment maker Harman International Industries Inc. to avoid paying a $225 million breakup fee that stems from abandoning their $8 billion buyout. And the $29 billion JC Flowers & Co. LLC-led buyout of Vienna, Va.-based student lender SLM Corp., or Sallie Mae, is in litigation.  Deal Video
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