M&A

CSC divests, PAE invests

Companies make $174 million deal for old DynCorp business

Computer Sciences Corp. is selling most of its Applied Technology Division to PAE Group for a cool $175 million.

ATD, as it is known, provides a variety of aviation maintenance, base operations and maintenance, test and training range support to the Defense Department, NASA and other agencies.

The business – to stretch memories a bit – also is the part of DynCorp that CSC kept when it spun out the bulk of that business several years ago.

The deal for ATD is part of CSC's portfolio shaping strategy, and is the company's sixth divestiture in seven months.

CSC is not dumping a poor performing business, but rather the ATD work doesn’t fit into CSC strategy, said Dave Zolet, executive vice president and general manager of CSC North American Public Sector business.

“Our focus is on next generation technology, and this business isn’t part of that,” he said. CSC did keep the part of ATD that does training and simulation work, which is a high-tech area, Zolet said.

CSC’s primary focus has been on cyber, big data, cloud computing and mission services. In addition to ATD, the company has sold other business units that do not fit into those buckets, including a flood insurance group, an IT staffing group and a credit services business that was worth $1 billion.

For PAE, the deal for ATD is an opportunity to expand into new markets and customers, said Mike Dignam, PAE president.

“We’ve been looking for opportunities to continue to build a government services company focused on mission support services,” he said. “We felt this was a great foundational piece for our platform.”

The deal for ATD brings new customers such as NASA, the Energy Department and intelligence customers as well as new lines of business, particularly for range engineering, maintenance and operations support services. For example, ATD supports underwater testing and training ranges for the Navy off the coast of Florida and California, he said.

PAE is picking up 5,400 employees and $760 million in revenue.

“We see those ranges as national assets, and as we look at the market, there is continued tempo related to testing new military capabilities and training troops as they come back from theater,” he said.

The business also has a significant backlog which is critical in an era of intense competition and shrinking budgets, he said. “To have quality of programs and the backlog is very attractive in a competitive marketplace.”

The all-cash deal is expected to close by the end of the summer. ATD will operate as a distinct business unit of PAE, and will be led by its current senior leaders.

The investment bank Houlihan Lokey served as an advisor to CSC on the transaction.

About the Author

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

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