Hewlett-Packard, the US printer giant, is to brave the bond markets in the worst credit crisis for a decade to raise capital for its $13.9 billion cash offer for EDS, the computer services company founded by Texan businessman, Ross Perot.

HP revealed today an agreed $13.9 billion cash offer for EDS which it hopes will enable it to compete with IBM in the highly lucrative computer services business.

The deal, which has taken several months to complete, values EDS at $25 per share, compared with company's closing stock price on Friday, the day before the talks were made public, of $18.85.

HP said that it would fund the deal from existing cash reserves and from "incremental" debt. A spokesman indicated today that HP is "going to the market" to raise the remaining funds and expected Wall Street's rating agencies to "reaffirm" their debt. The HP representative would not be drawn on how much cash HP was planning to raise.

The deal marks the first major deal by Mark Hurd, chief executive at HP, who succeeded Carly Fiorina when she was fired three years ago.

HP estimates that the takeover, which it expects to be completed in the second half of this year, will "more than double" the size of its business services operation, which last year derived revenues of $16.6 billion.

Computer services attract high profit margins. One industry insider, who declined to be named, said that such businesses typically enjoy margins of between 20 and 30 per cent - far higher than those derived from selling products such as laptops.

He said: "In an economic slowdown, these businesses become even more attractive. What is happening across the industry is that companies are looking down their pipeline and seeing a slowdown in sales. When things are soft, companies try to eke out as much value as possible from their infrastructure. They make do with what they have, rather than buying new equipment. Typically, they pay the likes of IBM and EDS as consultants on how to extract more value from their existing IT."

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