General Dynamics to Acquire CSRA for $9.6 Billion
(Source: General Dynamics; issued Feb 12, 2018)
FALLS CHURCH, Va. – General Dynamics and CSRA today announced that they have entered into a definitive agreement under which General Dynamics will acquire all outstanding shares of CSRA for $40.75 in cash. The transaction is valued at $9.6 billion, including the assumption of $2.8 billion in CSRA debt.

“The acquisition of CSRA represents a significant strategic step in expanding the capabilities and customer base of GDIT,” said Phebe Novakovic, chairman and chief executive officer of General Dynamics. “CSRA’s management team has created an outstanding provider of innovative, next-generation IT solutions with industry-leading margins. We see substantial opportunities to provide cost-effective IT solutions and services to the Department of Defense, the intelligence community and federal civilian agencies. The combination enables GDIT to grow revenue and profits at an accelerated rate. It will allow us to deliver even more innovative, leading-edge solutions to our customers.”

Larry Prior, chief executive officer and president of CSRA, said, “Our combination with General Dynamics represents an excellent outcome for CSRA’s stockholders, employees and customers. It builds on strong shared values, culture and a passion for serving our customers’ missions. We believe that this combination creates a clear, differentiated leader in the Federal IT sector, with a full spectrum of enterprise IT capabilities, including unique depth in Next-Gen offerings in conjunction with our commercial IT alliance partners.”

Novakovic continued, “I am very pleased to welcome CSRA’s talented leadership team and employees. This combination brings together two industry leaders with highly complementary capabilities to create a strong business with approximately $9.9 billion in revenue and double-digit EBITDA margins in the consolidating Government Technology Services sector.”

General Dynamics expects the transaction to be accretive to GAAP earnings per share and to free cash flow per share in 2019, and expects to generate estimated annual pre-tax cost savings of approximately 2 percent of the combined company’s revenue by 2020. We are committed to maintaining our strong credit ratings and using our robust cash flow for reduction of debt from the transaction, continuation of our dividend policy and the flexible deployment of capital, including ongoing investment in the business.

Transaction Terms and Financing

Under the terms of the agreement, which has been unanimously approved by the Board of Directors of both companies, a subsidiary of General Dynamics will commence a cash tender offer to purchase all of the outstanding shares of CSRA common stock for $40.75 per share in cash. The tender offer is subject to customary conditions, including antitrust clearance and the tender of a majority of the outstanding shares of CSRA common stock.

Following successful completion of the tender offer, General Dynamics would acquire all remaining shares not tendered in the offer through a merger at the same price as in the tender offer. General Dynamics expects to complete the acquisition in the first half of 2018.

We anticipate financing the transaction through a combination of available cash and new debt financing. Upon completion of the transaction, General Dynamics anticipates retaining strong credit ratings with net debt of approximately $10.5 billion.

Advisors

Stone Key Group, LLC served as exclusive financial advisor to General Dynamics and Jenner & Block LLP served as legal counsel. Evercore and Macquarie Capital served as financial advisors to CSRA and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal counsel.


Headquartered in Falls Church, Virginia, General Dynamics is a global aerospace and defense company that offers a broad portfolio of products and services business aviation; combat vehicles, weapon systems and munitions; C4ISR and IT solutions; and shipbuilding. The company’s 2017 revenue was

CSRA is a leading government IT business providing next-generation technology solutions to federal customers. CSRA's solutions are organized into six service areas: cyber; data and analytics; digital platforms; digital services; enterprise business services; and intelligent business process services. The company’s FY2017 (March) revenue was $5 billion.

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General Dynamics Expands IT Offerings with $9.6 billion CSRA Buy
(Source: Forecast International; issued Feb 12, 2018)
By Richard Pettibone
In a move aimed at gaining even more critical mass in its information technology services, General Dynamics has agreed to acquire CSRA in a deal valued at $9.6 billion, including the assumption of $2.8 billion in CSRA debt.

CSRA, which had sales of almost $5 billion in FY17 (ended March 31), was formed in 2015 when Computer Sciences Corporation (CSC) merged its North American Public Sector business and SRA International (formerly Systems Research and Applications Corporation) into a new public firm, CSRA. Today, CSRA is a pure play IT services provider to the U.S. government.

The company, which focuses on modernizing legacy systems and provides network and asset protection, is composed of three broad solution-based divisions: a Next Generation Technology division that handles challenges in cloud infrastructure, big data analytics, cybersecurity, and mobility; an Enterprise Services IT sector that delivers a wide range of technology-enabled solutions and services aimed at improving customer efficiencies; and a Mission and Scientific Solutions operation that focuses on healthcare, environmental, science, and threat reduction offerings.

CSRA is one of the largest systems integrators for the government that provides information technology (IT), mission- and operations-related services across the U.S. federal government to the Department of Defense, intelligence community and homeland security, civil, and healthcare agencies, as well as certain state and local government agencies. The company is also a major range-service contractor, supplying operations and maintenance services for aircraft flight tests, weapons tests and development, and manned and unmanned space missions.

Current key programs at CSRA include the U.S. Army’s Logistics Modernization Program, the Flight School XXI program at the U.S. Army Aviation Center in Fort Rucker, connectivity operations under the ONE-Net, and information technology support services for the U.S. Navy and Marines, as well as range of communications and IT support services for various U.S. military commands throughout the world.

CSRA’s future could be strong indeed, as recent budget allocations are focusing on cybersecurity and repairing IT infrastructure. The company also said that there are other opportunities in the federal space, including data analytics and modernization applications, for an as-a-service delivery model. These avenues, coupled with a growing defense budget, could translate into strong performance for CSRA under its new owner.

The operation will be integrated into the General Dynamics Information Systems and Technology division once the deal closes later in 2018.

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