The board of US defence contractor L-3 Communications has approved plans for a tax-free spin off of its government services unit later this year.
L-3 said the new unit, called Engility Holdings, will begin trading as a separate entity on the New York…
The board of US defence contractor L-3 Communications has approved plans for a tax-free spin off of its government services unit later this year.
L-3 said the new unit, called Engility Holdings, will begin trading as a separate entity on the New York Stock Exchange on 18 July.
Under the plans, each L-3 shareholder as of 16 July 2012 will receive one Engility share for every six shares of L-3 common stock. L-3 has around 97 million of outstanding shares, meaning its shareholders will be receiving approximately 16 million shares of Engility common stock.
“Engility will now be able to pursue new business opportunities unconstrained by organisational conflict of interest regulations and operate in a more cost-competitive manner,” explained L-3 CEO Michael Strianese.
“Additionally, L-3 will benefit from an enhanced focus on value-added solutions and its market-leading products and systems.”
Engility will retain around US$10m of cash on its balance sheet following the spin off. It will also incur roughly US$345m of debt financing, which will be used to pay a US$335m dividend to L-3 and to fund the transaction expenses.
L-3 anticipates raising approximately $325m in net proceeds from the move. This will be used to redeem US$250m of 6.375% senior notes due 2015, and repurchase US$75m worth of outstanding shares. The company expects to redeem the notes on 26 July 2012 at a price of 102.125%.
