Serco to acquire SI International

Serco Inc. and SI International Inc. have struck a deal for Serco to acquire SI in a cash transaction worth $423 million.

Serco, the U.S. division of the British Serco Group, is also assuming about $87.3 million in SI's debt. The purchase price is a 40 percent premium over SI's Aug. 26 closing price of $22.89 per share.

Based on 2007 data, the combined companies have $1.3 billion in revenue and 11,500 employees. Virtually all of the revenue comes from work with the federal government.

The deal adds to Serco's ability to serve the Defense Department, U.S. intelligence agencies and federal civilian agencies, the company said. The transaction is expected to close by the end of 2008. It is subject to regulatory and SI shareholder approvals.

"Serco and SI International share the same commitment to excellent service and complement each other exceptionally well in both capabilities and markets," said Ed Casey, chairman and chief executive officer of Serco Inc. "SI International strengthens our ability to bring business process re-engineering and technology solutions to the most demanding government missions, while our increased combined scale positions our businesses to deliver even larger and more complex integrated solutions for our customers."

The transaction would further evolve Serco's North American organization into a management services business, the company said.

"Now is the right time to go to the next level so the services we provide to our customers are enhanced by the scale and global reach that Serco can offer," said Brad Antle, SI's CEO.

The SI deal is the second major acquisition by Serco in three years. In 2005, the company acquired defense contractor Resource Consultants Inc.

Ray Oleson, SI's executive chairman, founded the company in 1998.

The transaction brings together two Washington Technology Top 100 companies. SI is ranked No. 44 on Washington Technology's 2008 Top 100 list of the largest federal government prime contractors, and Serco is ranked No. 56.

Skadden Arps Slate Meagher and Flom LLP and Kaye Scholer LLP (for regulatory matters) acted as legal advisers to Serco Inc. Wachovia Capital Markets LLC acted as the financial adviser and Morrison & Foerster LLP as the legal adviser to SI.

About the Author

Nick Wakeman is the editor-in-chief of Washington Technology. Follow him on Twitter: @nick_wakeman.

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