Engility makes $1.1B deal for TASC

TASC and its private equity backers have agreed to sell the company to Engility in a $1.1 billion deal.

The all-stock deal is expected to close during the first quarter of 2015.

In a sign of how tough the market has been in recent years, the sale prices for TASC is about $550 million less than what the private equity groups of Kohlberg Kravis Roberts & Co. L.P. and General Atlantic LLC paid for TASC when they bought the company from Northrop Grumman in December 2009.

Northrop sold off TASC to address organizational conflicts of interest concerns government customers were raising.

Engility officials said they were drawn in to TASC because of its presence in the intelligence, space and other markets where Engility is underrepresented.

“The combination of our two complementary businesses is transformation and represents a unique opportunity to create a top-tier government services business,” said Tony Smeraglinolo, Engility president and CEO.

For 2014, TASC is expecting about $1.1 billion in revenue. The company also brings along 4,000 employees.

With the acquisition, Engility will have annual revenue of $2.5 billion and 11,000 employees. Its business mix will be 48 percent with defense, 38 percent with intelligence customers, and 24 percent with civilian agencies.

TASC also adds 850 new contracts and task orders to Engility’s portfolio with very little overlap, the companies said. New or enhanced capabilities for Engility include intelligence analysis, space systems architecture analysis, cyber forensics and cybersecurity, ISR operations, geospatial intelligence, data analytics and secure cloud computing and mobile applications.

New customers include the Air Force, NASA and DISA. Engility’s presence will grow at agencies such as the Defense Threat Reduction Agency, FAA, the Missile Defense Agency and Naval Sea Systems Command.

Smeraglinolo will remain president and CEO, while TASC president and CEO John Hynes will become chief operating office. Edward Boykin, chairman of Engility and Peter Marino, chairman of TASC, will become co-executive chairman.

Barclays is serving as financial advisor to Engility, and Weil, Gotshal & Manges LLP and Bass, Berry & Sims PLC are serving as legal advisors. Lazard is serving as financial advisor and providing a fairness opinion to the Engility Board of Directors. Simpson Thacher & Bartlett LLP is serving as legal advisors to TASC. Paul, Weiss, Rifkind, Wharton & Garrison LLP are serving as legal advisor for General Atlantic. Jefferies Finance LLC is serving as financial advisor.

Despite a stellar reputation and track record of doing high-end national security work, TASC had its struggles and never really seemed to find its footing.

It went through CEOs since 2009, including Hynes. It has hired well-known and respected executives including Mark Forman, former CIO of the federal government.

The deal for TASC is the second one this year for TASC. Earlier this year, Engility acquired Dynamics Research Corp. for $120 million.