Five ACS Directors to Resign In Battle With Founder

Five independent directors of Affiliated Computer Services said Thursday they will resign after the company's chairman blamed them for a failed $6.1 billion private equity buyout bid.

ACS Chairman Darwin Deason, who was working with Cerberus Capital Management on the buyout offer, urged the directors to step down at a board meeting Thursday, saying they had lost shareholder support.

The directors responded in a statement that Deason had subverted their attempt to consider competing offers to Cerberus's bid to "prevent superior alternatives to your proposal from being considered."

They said they intend to step down, but they "first want to ensure their successors are truly independent and capable of protecting the company's minority shareholders."

Earlier this week, Deason and Cerberus withdrew their $62-a-share takeover offer for ACS , which provides business process outsourcing and information technology products, citing poor debt market conditions.

At the time, the buyout group said that, had the special committee of the board considering the offer engaged with Cerberus and Deason on the schedule proposed, the deal would
have closed.

"As of today, the board, despite its efforts, has failed to produce any other bidders or superior strategic alternatives, and the Cerberus offer is dead without the shareholders having had an opportunity to vote on it," Deason wrote in a letter to ACS's five independent directors.

The directors are Public Strategies Washington Chief Executive Joseph O'Neill, FAR Holdings Co LLC Chairman Frank Rossi, former U.S. Physical Therapy CEO J. Livingston Kosberg, McCuistion & Associates President Dennis McCuistion and former World Bank board member Robert Holland III.

Deason said almost a year had passed since the board authorized him and Citigroup to identify potential bidders, which produced the bid from Cerberus.

He criticized the ACS special committee for refusing to negotiate with Cerberus or himself, and cited shareholder Oppenheimer Funds Inc as saying it was "pretty upset" about not being given the chance to vote on the deal.

He said he wanted to nominate a slate of replacements.

The directors said Deason controlled more than 40 percent of the voting power of ACS, but represented less than 10 percent of the outstanding shares.

"We must look after minority shareholders -- even if it means you cannot get the deal that is most advantageous to you personally," they said in a letter to the chairman.

They also said they want to meet their proposed replacements, who are former Oracle Corp Executive Vice President Frank Varasano, former Crown Castle International Corp CEO Ted Miller, former Ashland Oil Vice President Richard Spears and former Booz Allen Hamilton
partner Kurt Krauss.