CACI Makes Bid for CSRA, Seeking to Break Up General Dynamics Deal -- Update
March 18 2018 - 8:22PM
Dow Jones News
By Dana Mattioli and Doug Cameron
CACI International Inc. has made a roughly $7.2 billion bid to
buy CSRA Inc. in an attempt to break up the information-technology
provider's sale to General Dynamics Corp.
CACI has offered $44 per share in cash and stock, the company
said in a statement Sunday, confirming an earlier report by The
Wall Street Journal. The bid consists of $15 a share in cash and
the rest in stock. That compares with the $40.75-a-share all-cash
deal CSRA agreed to last month with General Dynamics that has yet
to close.
CSRA on Sunday confirmed receiving the unsolicited proposal from
CACI.
It would be a big bite for Arlington, Va.-based CACI, which has
a market value of just under $4 billion even after its shares
closed at an all-time high Friday. It could have a difficult time
outgunning General Dynamics, a major aerospace-and-defense
contractor with a market value of $66 billion.
In a separate statement Sunday, CACI raised its forecast for net
income and the lower end of its revenue guidance for fiscal
2018
CSRA was approached by two companies early last year about a
potential combination, according to a prior regulatory filing,
triggering a three-way battle that General Dynamics appeared to
have won. CACI was one of those companies, according to people
familiar with the discussions.
Its latest move comes amid a scramble for greater scale among
companies supplying the Pentagon and other government agencies with
IT and analytic services.
Rising defense budgets and the boom in commercial jetliner sales
have fueled a surge in deal-making in the aerospace and defense
sectors.
Last year, United Technologies Corp. agreed to buy Rockwell
Collins Inc. for $23 billion in a deal that would create one of the
world's biggest aircraft-equipment makers. Northrop Grumman Corp.
struck a deal to buy defense contractor Orbital ATK Inc. for $7.8
billion.
Government departments are going through a major refresh of
antiquated IT systems, including switching more services to the
cloud and boosting cybersecurity. That has helped fuel deal-making
over the past five years, with CACI buying intelligence specialist
Six3 Systems Inc. and the IT arm of L-3 Communications Holdings
Inc.
Other big providers include Leidos Inc., which bought the IT arm
of Lockheed Martin Corp. to create an industry leader with forecast
sales of $10.6 billion this year.
CSRA is forecast to have sales of $5.4 billion this year and has
some of the highest margins in the sector. A purchase of the
company would double the size of General Dynamics' federal IT
business.
CACI and General Dynamics' IT arm were both forecast to have
revenues of $4.5 billion this year.
CSRA was formed two years ago when Computer Sciences Corp.
merged its federal arm with SRA International Inc., renaming the
remaining business DXC Technology Co.
DXC plans to bundle more federal IT assets, including two firms
acquired from private-equity investor Veritas Capital, into a new
stand-alone public company in May. Some analysts had expected CACI
to consider a bid for the as-yet unnamed company, which would have
annual sales around $4 billion.
Write to Dana Mattioli at dana.mattioli@wsj.com and Doug Cameron
at doug.cameron@wsj.com
(END) Dow Jones Newswires
March 18, 2018 20:07 ET (00:07 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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