Shares in Xchanging - which offers services ranging from back-office invoice processing to insurance claims settlement - closed up more than 7 percent to 172 pence on the London Stock Exchange.

CSC, which provides technology consulting, confirmed on Thursday that it had sent a letter to Xchanging's board, outlining its interest in the company.

Shore Capital analyst Robin Speakman said bidders were seeing value in Xchanging's strong insurance business and its Xuber software, which caters to the Lloyd's of London insurance market.

Computer Sciences is offering 170 pence per share, compared with Capita's fourth proposal of 160 pence per share, which values the company at 412 million pounds.

"I think that the franchise of this business, particularly in the insurance world, is worth more than 170 pence," Speakman told Reuters.

Although CSC topped Capita's bid, its offer still lags Xchanging's intrinsic value by 7.4 percent, according to Thomson Reuters StarMine. The value is calculated using analysts' five-year earnings estimates and modeling the growth trajectory over a longer period of time.

Earlier in November, U.S.-based private equity firm Apollo Global Management LLC dropped out of a race to acquire the company.

Shares in Computer Sciences were down 0.5 percent to $66.75 on the New York Stock Exchange.

(Reporting by Aastha Agnihotri in Bengaluru; Editing by Savio D'Souza and Anil D'Silva)

By Aastha Agnihotri