Science Applications International plots IPO

Science Applications International Corp. plans to shed its employee ownership model and conduct an initial public offering in 2006, the company said today.

Proceeds from the so far unpriced IPO will be used to pay a special dividend to SAIC's stockholders, mostly comprising employees. The Washington Technology Top 100 company also said the IPO will allow it to better use its cash to fund organic growth and make acquisitions.

In June the company's leadership said that it was considering options to restructure the company because its employee-ownership structure had created a drain on resources.

"Over the past five years, we have used more than $2.5 billion of cash to balance our stock system," said SAIC Chairman and CEO Kenneth Dahlberg in a letter to employees posted on the company Web site today.

On Oct. 7, SAIC's board of directors will set the stock price for a limited order trade cycle.

The company also is conducting a capital restructuring that will create a holding company, SAIC Inc. The company's current shareholders will become shareholders of the holding company.

In the capital restructuring, each outstanding share of the company's class A common stock will be converted into the right to receive two shares of class A preferred stock of SAIC Inc. Each outstanding share of SAIC class B common stock will be converted into the right to receive 40 shares of class A preferred stock of the new entity. SAIC will offer common stock in its initial public offering.

Based in San Diego, SAIC employs about 42,400 workers and had revenue of almost $7.2 billion for the fiscal year ended Jan. 31. The company is No. 3 on Washington Technology's 2005 Top 100 list of federal prime contractors.

(Posted 10:58 a.m. and updated 1:45 p.m., Sept. 1)