DXC pushes back closing of Vencore-Keypoint deal

DXC Technology CEO Mike Lawrie said Thursday the company now expects the separation of its U.S. public sector business and subsequent merger into Vencore and KeyPoint Government Solutions to close in May.

Speaking on DXC’s third quarter earnings call with investors, Lawrie said DXC is delaying the deal’s closure from its previous expectation of the end of March or early April on getting an accounting firm in place to audit its almost $2.9 billion federal business.

“We lost about 30 days in getting that accounting firm approved and we’ve completed that work now,” Lawrie told analysts. Moving the closure to May is “allowing the necessary time for the (Securities and Exchange Commission) review and approval process,” Lawrie said.

First announced in October, this complex three-way deal will create a new publicly-traded government contractor that will start out at close to $4.3 billion in annual revenue. The Federal Trade Commission gave antitrust regulatory clearance for the transaction in December.

The still-unnamed company is being created through a Reverse Morris Trust transaction: the same structure used to make what is now CSRA in 2015 and DXC itself last year. Leidos also used the RMT method for its merger with the former Lockheed Martin IT business in 2016.

Vencore CEO Mac Curtis will be chief executive of the future company -- now called “Ultra SpinCo” in SEC filings -- being formed through the three-way deal. DXC’s U.S. public sector head Marilyn Crouther will become chief operating officer.

Lawrie will chair the board of directors and an additional seat on the board will go to Ramzi Musallam, CEO of Vencore’s owner, the private equity firm Veritas Capital. DXC shareholders will own 86 percent of the future company and Veritas Capital will retain 14 percent.

DXC has “conducted a series of integration summits bringing together leaders from each part of the new company,” Lawrie said. “The operating model for the new company is finalized.”