SAIC to acquire Engility in all-stock deal valued at $2.5B
SAIC (SAIC) and Engility Holdings (EGL) announced that they have entered into a definitive agreement under which SAIC will acquire Engility in an all-stock transaction valued at $2.5B, $2.25B net of the present value of tax assets, creating the second largest independent technology integrator in government services with $6.5B of pro-forma last 12 months’ revenue.
The combination of these two complementary businesses will accelerate SAIC’s growth strategy into key markets, enhance its competitive position and provide significant financial benefits.
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.
Under the terms of the merger agreement, Engility stockholders will receive a fixed exchange ratio of 0.450 shares of SAIC common stock for each share of Engility stock in an all-stock transaction.
Based on an SAIC per share closing price of $89.86 on September 7, 2018, the transaction is valued at $40.44 per share of Engility common stock or $2.5B in the aggregate, including the repayment of $900M in Engility’s debt.
SAIC has obtained a financing commitment letter from Citigroup Global Markets Inc. for a new seven-year senior secured $1.05B term loan facility under our existing credit agreement.
The proceeds will be used to repay Engility’s existing debt and associated fees. SAIC expects no immediate change to its quarterly cash dividend as a result of this transaction.
The transaction is expected to close by the end of the fiscal fourth quarter ending February 1, 2019, following customary closing conditions, including regulatory and SAIC and Engility shareholder approvals.
The transaction has been unanimously approved by both boards.
The businesses will continue to operate separately until the transaction closes. The combined company will retain the SAIC name and continue to be headquartered in Reston, Virginia.
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.
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