Northrop to sell TASC for $1.65 billion

General Atlantic and Kohlberg Kravis Roberts join forces to make the deal

After a search of less than three months, Northrop Grumman has signed a deal to sell its TASC unit for $1.65 billion to an investment group led by General Atlantic LLC and Kohlberg Kravis Roberts & Co. LP. 

Northrop Grumman began looking for a buyer for TASC in August when it hired Goldman Sachs and Credit Suisse to help it divest the business.

The sale was necessary as Northrop Grumman was feeling pressure to comply with new organizational conflicts of interest laws, also known as OCI.

TASC provides the government with highly technical advisory and engineering services that help them plan and develop large systems such as weapons platforms and satellite communications. Other parts of Northrop Grumman then competed with others to win the contracts to build and maintain those systems.

Complaints have ramped up in recent years from those who saw these arrangements as rife with potential conflicts of interest. In May, President Barack Obama signed the Weapons System Acquisition Reform Act, which tightened rules governing these types of organizational conflicts of interest.

The deal “reflects Northrop Grumman’s desire to align quickly with the government’s new organizational conflict of interest standards, while preserving TASC’s unique organizational culture and its status as the advisory services employer of choice,” said Ronald D. Sugar, Northrop Grumman’s chairman and chief executive officer.

TASC is based in Chantilly, Va, and has 5,000 employees and is expected to have $1.6 billion in 2009 revenue.

The deal with General Atlantic and KKR was announced Sunday night and is expected to close before the end of year, following regulatory approvals including a Hart-Scott-Rodino review.

The sale should net $1.1 billion in cash after taxes. The proceeds will be used to repurchase shares of common stock. The sale should be neutral to 2009 and 2010 earnings, the company said.

Northrop Grumman will hold a conference call at 11:30 a.m. EST today discuss this announcement. A live audio broadcast of the conference call will be available on the investor relations page of the company’s Web site.

Northrop Grumman is ranked No. 3 on Washington Technology’s 2009 Top 100 list of the largest government contractors.

About the Author

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

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