Procter & Gamble close to signing £4bn outsourcing deal with EDS

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Procter & Gamble close to signing £4bn outsourcing deal with EDS

Electronic Data Systems (EDS) is back in the running for a Procter & Gamble outsourcing contract that analysts believe could be worth between $4bn (£2.57bn) and $10bn (£6.43bn) over eight to 10 years.

EDS, which in July had walked away from negotiations over the project, is now the only candidate and the companies "are close to finalising a contract," a Procter & Gamble spokeswoman said. EDS confirmed the negotiations were taking place and are expected to last several more days.

The news followed a shock EDS profit warning this week that saw its share price fall almost 50%. Earlier in the week Affiliated Computer Services (ACS), the front-runner for the contract, announced that it was abandoning negotiations with Procter & Gamble.

Procter & Gamble, which sells household goods in more than 160 countries, is looking for an IT services provider that will buy its Global Business Services unit, which handles its back-office operations, and that will in turn outsource those services to Procter & Gamble.

The contract will cover IT and business operations, such as payroll, billing and accounting.

ACS said it pulled out of the negotiations because the terms of the contract would not be in its best interest. EDS made a similar statement in early July, when it withdrew from the bidding process.

In July EDS chief executive Dick Brown told analysts that "the financial model, especially related to the acquisition cost, simply didn't make financial sense as structured for EDS, and we withdrew". The company has not yet explained its decision to re-enter negotiations.

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