General Dynamics (NYSE: GD) has agreed to acquire CSRA (NYSE: CSRA) for approximately $9.6 billion in a move to form a combined information technology platforms provider in the government IT services sector.
General Dynamics said Monday it will pay $40.75 in cash for each share of CSRA stock and assume $2.8 billion in net debt from the Falls Church, Virginia-based government IT services contractor as part of the deal.
Both companies expect to close the transaction in the first half of this year, subject to the antitrust clearance process and other customary closing conditions.
Phebe Novakovic, General Dynamics chairman and CEO, said the acquisition would help General Dynamics™ IT business expand its client base and capabilities as well as provide an opportunity to deliver IT platforms services to the intelligence, defense and federal civilian sectors.
Novakovic added the combined company will have approximately $9.9 billion in revenue and double-digit earnings before interest, taxes, depreciation and amortization margins.
Larry Prior, CSRA president and CEO, said the combination would create a federal IT services contractor œwith a full spectrum of enterprise IT capabilities.
Novakovic and Prior are both 2018 Wash100 recipients.
Falls Church-based General Dynamics expects the deal to be accretive to free cash flow per share and earnings per share in 2019 as well as realize annual pre-tax cost savings of approximately 2 percent of the combined entity™s revenue by 2020.
The aerospace and defense contractor plans to use debt financing and existing cash to fund the transaction, which was approved by both firms’ boards of directors.
Stone Key Group and Jenner & Block LLP respectively serve as financial and legal advisers to General Dynamics in the transaction.
Macquarie Capital and Evercore advise CSRA on the deal™s financial aspects, while Paul, Weiss, Rifkind, Wharton & Garrison LLP serve as the firm™s legal counsel.
