SAIC to acquire Engility
- By Ross Wilkers
- Sep 10, 2018
Science Applications International Corp. has agreed to acquire competitor Engility Corp. in a $2.5 billion all-stock transaction that will create one of the three largest publicly-traded government IT and professional services company.
This transaction continues a run of megadeals in the government market within the past two years focused on building scale to add resources for bids on complex technology projects. Underpinning these megadeals is renewed confidence in the market amid defense and overall IT spending increases.
Within the past 12 months General Dynamics doubled its IT services business to nearly $10 billion in projected annual revenue through the CSRA acquisition and the roughly $4.2-billion Perspecta emerged in June from the three-way merger of DXC Technology’s U.S. public sector business, Vencore and KeyPoint. And Leidos closed its transformative merger with the former Lockheed Martin IS&GS services business two years ago.
A combination of SAIC and Engility comes out to $6.5 billion in annual revenue, which puts it in front of the $6.3-billion Booz Allen Hamilton, according to an investor presentation on the deal. SAIC contributes $4.6 billion and Engility brings $1.9 billion to that combination, the slides say.
SAIC expects to close the transaction by Feb. 1, 2019, the end of its current fiscal year. The deal remains subject to regulatory approvals and shareholder approvals from both companies.
Engility itself was a major player in consolidation as it acquired TASC nearly three years ago from private equity firms KKR and General Atlantic. Both investment groups took shares in Engility and seats on the board of directors.
Earlier this year, KKR and General Atlantic exited a three-year lockup period that allowed them to start divestitures of their shares. Reuters reported in July that Engility was exploring a sale and that SAIC and CACI International expressed interest in a deal.
Post-close, SAIC shareholders will own 72 percent and Engility shareholders will own 28 percent of the combined company. SAIC will also grow its board of directors by two seats with the additional members coming from Engility’s board.
SAIC CEO Tony Moraco and Chairman Sandy Sanderson will continue to lead the company post-close. SAIC is targeting $150 million in annual gross cost synergies.
Citigroup was lead financial adviser and Stone Key Partners was co-financial adviser to SAIC. Morrison & Foerster LLP served as legal counsel. Arnold & Porter provided financing legal counsel. Renaissance Strategic Advisors Ltd. provided business due diligence and strategy support services.
Guggenheim Securities was lead financial adviser to Engility, and Weil, Gotshal, & Manges LLP and Bass, Berry and Sims PLC acted as legal counsel. Fairmont Consulting Group provided business due diligence services. Morgan Stanley & Co also provided financial advisory services to Engility.
Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at firstname.lastname@example.org. Follow him on Twitter: @rosswilkers. Also find and connect with him on LinkedIn.