US aerospace contractor L-3 Communications has sold its government services unit for US$550m to CACI International, a smaller defence contractor. The deal helps L-3 sharpen its focus on defence electronics, communications and ISR.
US aerospace contractor L-3 Communications (LLL.N) has sold its government services unit for US$550m to sharpen its focus on defence electronics, communications and ISR.
CACI International (CACI.N), a smaller defence contractor, said it bought L-3’s National Security Solutions (NSS) business to significantly expand in key markets including enterprise IT and intelligence services.
CACI is looking to boost ties with the US government and pursue larger contracts. It is also said to be interested in the information systems and government services assets that aerospace giant Lockheed Martin (NYSE:LMT) put up for strategic review on 20 July.
Lockheed CFO Bruce Tanner was cited telling a conference hosted by Credit Suisse last week that, following strong interest in the assets, it now expects to conclude the review in Q1 2016, rather than by the end of this year as initially planned.
When US engine specialist Aerojet Rocketdyne (NYSE:AJRD) made a US$2bn bid for United Launch Alliance in September, Lockheed was reportedly more open to selling its 50% stake in the launch services firm as part of the review process. ULA did not take long to dismiss the offer.
L-3 has been following a trend among US aerospace groups to reshape portfolios in the face of lower government spending.
Michael Strianese, L-3’s chairman and CEO, said: “The proceeds from the sale will provide L-3 with additional flexibility to continue focusing on a disciplined and balanced capital allocation strategy to drive shareholder value and enhance the market-leading products and systems we provide to our customers.”
He added that the group will continue to evaluate its portfolio as it strengthens its focus on higher-returning markets.
L-3, which expects to generate US$10.4bn in sales for 2015 excluding NSS, hired Deutsche Bank for financial advice and Simpson Thacher & Bartlett as its legal adviser.
CACI said NSS will add about US$1bn of annual revenue to its business. The group, which posted about US$3.3bn in sales for the year to 30 June 2015, will finance the transaction through a combination of term and revolving debt.