Federal antitrust officials clear DXC-Vencore-Keypoint deal

Federal antitrust officials clear the complex spinoff and subsequent three-way merger of DXC's U.S. government business into Vencore and KeyPoint.

The Federal Trade Commission has cleared the three-way merger of DXC Technology’s U.S. government business into fellow contractors Vencore and KeyPoint Government Solutions to create a new, independent public sector IT and professional services company.

DXC received an early termination of the FTC’s standard 30-day regulatory review waiting period as mandated by the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transaction first announced in October remains subject to DXC’s spinoff of the U.S. government business and other customary closing conditions, DXC said Wednesday.

All parties involved in the tax-free, Reverse Morris Trust transaction expect it to close by the end of March 2018. Deals subject to a HSR Act review can proceed upon the waiting period’s expiration or if the government ends it early.

This was the government services landscape’s largest, most complex deal of 2017 in a busy period for mergers-and-acquisitions in the overall federal market. On the hardware side, Northrop Grumman’s acquisition of Orbital ATK first announced in September is in the midst of an FTC regulatory review.

Upon closure, the future company currently called “NewCo” by DXC is projected at $4.3 billion in annual revenue to become the sixth-largest publicly-traded government IT and professional services contractor.

This company to be named later would extend across virtually every segment of the federal government including defense, intelligence, civilian, space, law enforcement and health care.

Services will encompass cybersecurity, big data analytics, cloud computing, enterprise IT, systems engineering and background investigation services.

DXC shareholders will own 86 percent of the future company’s stock. Veritas Capital -- current owners of Vencore and KeyPoint -- will hold the remaining 14 percent of stock in the future company.

Current Vencore CEO Mac Curtis will take the chief executive role at the future company and DXC's U.S. government business lead Marilyn Crouther will become chief operating officer. Veritas CEO Ramzi Musallam will also join the board of directors.

Shares in DXC have risen 8 percent since they announced the deal.