SAIC takes next step toward split
Filing with SEC describes structure, challenges, revenues
- By Nick Wakeman
- Mar 08, 2013
Science Applications International Corp. is a step closer to separating into two companies, now that it has filed documents with the Securities and Exchange Commission to register stock for the new company.
SAIC is spinning out its IT and technical services business into a new firm that will keep the SAIC name. The remainder of the company will move forward as Leidos.
In a lengthy Form 10 filing with the SEC, SAIC kicks off the process that will allow the new SAIC to be a publicly traded company, once it is split off from Leidos.
The 145-page document reviews the three main reasons for the split, as well as financial information on the companies. The company sees a split as reducing regulatory constraints, such as organizational conflicts of interest. The move also will bring more focus to management efforts and investment strategies.
According to the filing, the company sees the strengths of the new SAIC being its enduring customer relationships, lifecycle offerings, a diversified contract base, technical expertise and experienced management.
Its growth strategy will focus on expanded offerings to large customers, pursuit of underserved customers and investing to expand its capabilities. The new company also will operate with a matrix organizational structure, which means that it will be organized around customers and technical capabilities.
The new company will be led by Anthony Moraco, CEO. John Hartley is on tap to be chief financial officer. Thomas Baybrook will be chief of administration and operations. Brian Keenan will lead human resources as executive vice president.
This technical services and IT portion of SAIC had revenue of $3.6 billion for the nine months ended Oct. 31, and net income of $139 million.
The new company will have two sectors:
Technical services, which includes engineering and maintenance of ground and maritime systems, logistics, training and simulation. It also includes operation and program support services. Deborah James will be the sector president of this group.
Enterprise IT, which is comprised of end-to-end enterprise IT services, including design, development, integration, management and operations of IT infrastructure. Nassic Keen will be the sector president for enterprise IT.
The filing describes a highly competitive marketplace that SAIC sees getting more competitive and price sensitive.
As an example, SAIC cited the loss of the DISN Global Solutions contract, which SAIC held as the incumbent. In SAIC’s fiscal 2013, ended Jan. 31, it brought in $425 million in revenue. For fiscal 2014, the contract will bring in only $40 million as work is moved to the winning contractor.
But the company feels its size and scale will position it to compete in the market, and because it will be split from what will be called Leidos, the company will be free of organizational conflicts of interest. Being free of OCI will allow SAIC to expand its market share with existing customers, and pursue new opportunities, according to the filing.
There is one regulatory hurdle the split still needs to clear: approval from the Internal Revenue Service that the split will be tax free to SAIC and its shareholders, who will hold both Leidos stock and SAIC stock as a result of the separation.
The split is expected to be completed by Jan. 31, 2014.