London calling

QinetiQ makes move into the Top 100, <@SM>creates U.S. government IT platform

The British invasion of the U.S. government IT market continues as QinetiQ Group Plc announced an agreement to buy Top 100 company Apogen Technologies Inc. for about $300 million.

QinetiQ, pronounced "kinetic," made its first play into the U.S. market with the purchases of Foster-Miller Inc. of Waltham, Mass., and Westar Aerospace & Defense Group Inc. of St. Louis in late 2004.

The company joins other British firms such as BAE Systems Plc, Pearson Plc and Serco Plc as active acquirers in the U.S. government market.

The Apogen deal, announced Aug. 3, creates a third platform for growth in the United States, said Sir John Chisolm, chief executive officer of Farnborough, U.K.-based QinetiQ.

Foster-Miller and Westar brought in technology, systems engineering and customer support business, and Apogen will be QinetiQ's IT platform.

"Our objective now is to develop the synergies between these three operating businesses, which together delivered some $600 million in revenue in 2004," Chisolm said.

Apogen of McLean, Va., will become a wholly owned subsidiary of QinetiQ's North America operations once the deal closes in September, said Todd Stottlemyer, Apogen's chief executive officer.

Apogen, a provider of technology solutions to the U.S. government, will retain its name, management team and staff of 900, Stottlemyer said.

The merger will allow Apogen to expand by adding QinetiQ's capabilities to its offerings. The company also will be positioned to pursue business opportunities in the United Kingdom and the rest of the European Union.

Having "a $2 billion company behind us gives us more credibility for larger opportunities," Stottlemyer said.

QinetiQ was formed in 2001 when the British government privatized the majority of its Defense Evaluation and Research Agency, part of the U.K. Defense Ministry. It employs more than 12,000 workers in the United Kingdom and the United States, including 10,000 scientists and engineers, and has a U.S. sales operation in Crystal City, Va.

In February 2003, The Carlyle Group, a private equity firm based in Washington acquired a 33.8 percent stake in QinetiQ.

Acquisitions will continue to be a part of QinetiQ's growth strategy, Chisolm said. On Aug. 1, Foster-Miller announced it was buying Planning Systems Inc. of Reston, Va., for $42 million. PSI is a 350-employee applied science and systems engineering firm that had 2004 revenues of $44.6 million.

The deal for Apogen will be QinetiQ's first acquisition of a Washington Technology Top 100 company. Apogen is No. 48 on the 2005 list, which ranks companies according to their prime contracting revenue.

Apogen had 2004 revenue of $205 million, Stottlemyer said. Its government clients include the Agriculture, Defense, Energy and Homeland Security departments, IRS, Census Bureau, Customs and Border Protection and the Navy.

Apogen itself is a creation of an acquisition strategy and is backed by the equity investment group Arlington Capital Partners. Apogen was created after ITS Services Inc. of Springfield, Va., and Science & Engineering Associates Inc. of New Orleans merged in January 2004.

IN OTHER M&A NEWS

ACS to acquire Ascom's transport division Affiliated Computer Services Inc. will acquire the transport revenue division of Ascom AG for $104 million. ACS plans to fund the acquisition through its existing credit.

The acquisition takes Dallas-based ACS into the international transportation services industry and expands its U.S. portfolio in the transit and parking payment markets, company officials said.

The transport revenue division of Bern, Switzerland-based Ascom comprises three business units: fare collection, airport parking and toll collections. The acquisition adds 800 employees to the company.



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