M&A

Deal done: General Dynamics closes CSRA buy

General Dynamics said Tuesday it has closed its mega acquisition of CSRA in a move that completes one of the largest transactions to hit the federal market in recent years.

First announced Feb. 12, the deal creates one of the first- or second-largest government IT contractors depending on the metric used to size up General Dynamics’ IT services business versus Leidos.

In mid-March, the once-private bidding war for CSRA came became public after CACI International announced a $7.2 billion cash-and-stock offer that sought to top General Dynamics’ $6.8 billion all-cash bid.

CSRA became an attractive target for buyers with its emphasis on “next-generation IT” services in cloud computing and cybersecurity along with an extensive partnership network that includes commercial vendors Amazon and Microsoft, among others.

After CACI took its renewed bid public, General Dynamics then raised its bid to $6.9 billion and CSRA accepted that offer. During the private and public bidding process, CSRA’s board of directors long preferred General Dynamics’ all-cash bid versus the cash-and-stock bid from CACI.

The General Dynamics-CSRA deal's total value comes out to $9.7 billion when including the $2.8 billion in CSRA debt that GD now assumes.

CACI went as high as $6.72 billion in cash-and-stock during the private auction. An unnamed “Company B” also made a $6.88 billion cash-and-stock bid for CSRA during the private bidding process that analysts are fairly certain was Science Applications International Corp.

CSRA is now a part of General Dynamics’ IT services business, which now becomes a fifth reportable segment for the defense contractor.

The close of the transaction also means that CSRA CEO Larry Prior closes a remarkable run. He was the executive at Computer Sciences Corp. that engineered the spin-out of CSC's public sector business and the merger with SRA International to create CSRA. Under his watch, CSRA closed two acquisitions and it won several major contracts including hanging on to one of its largest contracts with the National Security Agency.

General Dynamics expects IT services revenue of $9.9 billion this year to make it the largest contributing segment in terms of overall sales anticipated.

Leidos posted $10.6 billion in revenue last year, its first full calendar period after the merger with Lockheed Martin’s IT business closed in August 2016.

Click here to read our extensive coverage of the CSRA deal every step of the way.

The combination of General Dynamics IT with CSRA is one of a few large government market consolidations that were anticipated for closure this year.

In late May or early June, expect the formation of the independent, publicly-traded “Perspecta” to close via the three-way deal that is merging DXC’s U.S. public sector business with Vencore and KeyPoint Government Solutions.

U.S. antitrust officials are reviewing Northrop Grumman’s $7.8 billion cash acquisition of Orbital ATK, first announced in September of last year and one that regulators in Europe cleared in February. Pending the U.S. review, that deal is slated for closure in the first half of this year.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also find and connect with him on LinkedIn.

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