EDS will maintain its headquarters in Plano, Texas. Source: New York Times

Hewlett-Packard (HP) has signed a definitive agreement to purchase Electronic Data Systems (EDS) for approximately $13.9 billion.

The terms of the transaction, which is expected to close in the second half of 2008, have been unanimously approved by the HP and EDS boards of directors.

HP said it intends to establish a new business group, to be branded EDS – an HP company, which will be headquartered at EDS’ existing executive offices in Plano, Texas.

EDS will continue to be led by Ronald A. Rittenmeyer, EDS chairman, president and CEO, who will join HP's executive council and report to Mark Hurd, HP's chairman and CEO, according to HP.

“The combination of HP and EDS will create a leading force in global IT services,” said Hurd. “Together, we will be a stronger business partner, delivering customers the broadest, most competitive portfolio of products and services in the industry.”

With the acquisition, HP said it expects to more than double its services revenue, which amounted to $16.6 billion in fiscal 2007. The companies' collective services businesses, as of the end of each company's 2007 fiscal year, had annual revenues of more than $38 billion and 210,000 employees, doing business in more than 80 countries, according to EDS.

EDS stockholders will receive $25 for each share of EDS common stock that they hold at the closing of the merger, which is subject to customary closing conditions, including the receipt of domestic and foreign regulatory approvals and stockholder approval.

The EDS acquisition will provide extensive experience in offering solutions to HP customers in the areas of government, healthcare, manufacturing, financial services, energy, transportation, communications and consumer industries and retail, according to the Palo Alto, Calif.-based HP.