General Dynamics Buying CSRA for $6.8 Billion -- 3rd Update
February 12 2018 - 10:58AM
Dow Jones News
By Doug Cameron and Cara Lombardo
General Dynamics Corp. said it had agreed to buy CSRA Inc. for
$6.8 billion as part of the defense contractor's push into
government information-technology services.
The maker of Abrams tanks and Gulfstream business jets will
double its annual IT services sales to become one of the largest
providers to the Pentagon and other agencies such as the Central
Intelligence Agency and the Department of Health and Human
Services.
Government departments are going through a major refresh of
antiquated IT systems, including switching more services to the
cloud and boosting cybersecurity. That has triggered a round of
deal-making over the past three years among providers seeking
greater scale to handle ever-larger projects as the government
bundles contracts to secure savings.
Other big providers include Leidos Inc., which bought the IT arm
of Lockheed Martin Corp. to create an industry leader with annual
sales of $10.1 billion, and Booz Allen Hamilton Corp.
CSRA has annual sales of almost $5 billion and among the highest
margins in the sector. The company, formed two years ago when
Computer Sciences Corp. merged its federal arm with SRA
International Inc., has partnered with the web services arm of
Amazon.com Inc. to provide government departments with cloud
services.
General Dynamics said that CSRA would expand its access to
intelligence agencies and that rising federal spending -- with the
White House due to issue 2019 budget requests on Monday -- would
reduce the pricing pressure on providers that forced many smaller
players to combine.
Falls Church, Va.-based General Dynamics has lagged behind the
broader increase in defense stock prices, in part because sales of
business jets have remained flat in recent years.
General Dynamics is offering $40.75 a share for CSRA, whose
shares closed at $30.82 Friday and surged 32% premarket Monday to
trade around the offer price. Including the assumption of $2.8
billion of CSRA's debt, the deal has a value of $9.6 billion.
General Dynamics said it expects the deal to close in the first
half of 2018, increase earnings and generate annual pretax cost
savings of about 2% of the combined company's revenue by 2020.
Write to Doug Cameron at doug.cameron@wsj.com and Cara Lombardo
at cara.lombardo@wsj.com
(END) Dow Jones Newswires
February 12, 2018 10:43 ET (15:43 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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