Tracor Expands IT Services with Cordant Buy
The purchase follows a trend by aerospace and defense companies toward increasing their infotech presence in the federal market
Tracor Inc. is expected to follow in the footsteps of a number of its aerospace and defense rivals as it acquires Cordant Inc. of Reston, Va., and enlarges its presence inside the information technology services market.
Tracor, one of the 15 largest defense electronics firms in the United States, plans to acquire Cordant, a 27-year-old systems integrator, as it fuels its advance inside the federal IT services market.
"This acquisition is Tracor's attempt to continue to diversify," said Doug Schmidt, analyst for Ferris Baker Watts, Baltimore. "The Cordant acquisition will bring a significant percentage of IT service contracts to Tracor." Cordant's move into IT services resembles the strategy of such defense and aerospace giants as Lockheed Martin Corp. and Litton Industries Inc., which are now also working to expand their presence in the federal IT services market.
According to Peter Kusek, Cordant's president and chief executive officer, Tracor was attracted to certain Cordant customers, including the U.S. Postal Service, a $20 million account and the integrator's largest customer. In 1995, the company reported $70.1 million in contracts.
"This acquisition was a very crucial move for Tracor," said Schmidt. "Tracor is devoid of information technology, but Cordant puts them at the heart of IT contracts. And Cordant has shown exceptional growth."
Schmidt says shrinking defense budgets have caused the whole aerospace and defense industry to move toward information technology. Lockheed Martin expanded its reach into the commercial infotech sector with the $9.1 million acquisition of Loral Corp. earlier this year. New York-based Loral had $886 million in federal infotech contracts in 1995. Bethesda, Md.-based Lockheed Martin expects infotech revenues to reach $2 billion by the end of 1996.
In December 1995, Litton Industries, the Woodland Hills, Calif.-based manufacturer of advanced electronics and defense systems, bought the infotech division of PRC Inc. for $425 million. PRC executives gave Litton a lineup of potential acquisitions to help the company build itself into a dominant infotech player.
A large portion of Tracor's business includes information technology applications for the Department of Defense. Tracor will establish a business unit within the company called the Tracor Information Systems Co. The unit will be comprised of Cordant and Quality Systems Inc., a subsidiary of Tracor's Vitro Corp. The combined direct annual sales for the division is expected to exceed $200 million for 1996.
Approximately one-half of the new business unit's sales will be to the DoD and the other half primarily to non-DoD federal government agencies and Cordant's client, the U.S. Postal Service.
The $65 million acquisition is expected to be completed by September 30.