Science Applications International Corporation (SAIC) and Engility Holdings Inc have entered into a definitive agreement under which SAIC will acquire Engility in an all-stock transaction valued at $2.5 billion. The acquisition will create the second largest independent technology integrator in government services with $6.5 billion of pro-forma last 12 months’ revenue.
The transaction will create market sub-segment scale in strategic business areas of national interest, such as defense, federal civilian agencies, intelligence, and space. In addition, it expands the capabilities of both companies, bringing additional systems engineering, mission, and IT capabilities to a broader base of customers.
The announcement illustrates how increased defense spending is driving contractors to pursue mergers so they have more scale to bid on bigger projects. One previous example is General Dynamics Corp’s acquisition of CSRA Inc for $9.7 billion, completed in April, in a move to expand its government services business.
The SAIC/Engility transaction is expected to close by the end of the fiscal fourth quarter ending Feb. 1, 2019, following customary closing conditions, including regulatory and SAIC and Engility shareholder approvals. The transaction has been unanimously approved by both Boards of Directors. The businesses will continue to operate separately until the transaction closes. Upon closing, SAIC shareholders will own approximately 72 percent and Engility shareholders will own approximately 28 percent of the combined company on a pro forma, fully diluted basis.
The combined company will retain the SAIC name and continue to be headquartered in Reston, Va. Following closing, Tony Moraco will continue as CEO and as an SAIC Board member. SAIC will expand its board to include two additional members from Engility’s Board of Directors.
