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Acquisitions in Defense Sector Continue Apace as Year Ends
By James. H. Smith
December 30, 2005
If one statistic can mark activity in the defense sector as the year draws
to a close, it is a large year-on-year gain reported in the Standard &
Poor's (S&P) aerospace and defense index.
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Through December 9, the index jumped 12.5 per cent versus a 4.8 per cent
rise in the S&P 1500 index.
The increase was spurred mostly by gains in shares of Boeing and Lockheed
Martin.
Still the credit rating agency continues to report a negative outlook for
the defense sector in the wake of modest growth in the US military and R&D
budgets. The key consideration is that the US government will continue to
spend although at a slower rate.
As an indication that the defense sector is still appealing, on December 22
New York Stock Exchange-traded CACI International announced that it has
signed a definitive agreement to purchase substantially all of the assets of
privately held Maryland-based Information Systems Support, Inc, an
information technology solutions provider primarily to the US government.
Terms of the transaction were not disclosed.
Closing is anticipated during CACI's third fiscal quarter that begins
January 1, 2006.
ISS's revenue is estimated to exceed US$200 million for their fiscal year
ending December 31.
CACI expects that the transaction will be slightly accretive to its fiscal
year ending June 30, 2006 and the company anticipates revenue of
approximately US$75 million for the remainder of the fiscal year.
With the acquisition, CACI broadens its presence in several high-growth
areas of the priority driven US national security market. The acquisition
will bring CACI key new clients with growing requirements and priority
funding which are complementary to its customer base, in addition to new
locations targeted for growth.
The deal continues the consolidation in the US government-technology sector.
Submarine manufacturer General Dynamics Corporation and Lockheed Martin
Corporation, which produces F-16 fighter jets, both recently bought
technology companies.
New York Stock Exchange-listed General Dynamics has entered into a
definitive agreement to acquire Anteon International Corporation, also
listed on the New York Stock Exchange, for US$55.50 in cash for each
outstanding Anteon share. The cost of the transaction would be approximately
US$2.2 billion, including the assumption of Anteon’s US$100 million of net
debt.
The proposed acquisition, which has been approved by the boards of directors
of both companies, would be immediately accretive to General Dynamics’
earnings. Subject to an affirmative vote by Anteon shareholders and normal
regulatory approvals, the transaction is expected to close by the end of the
second quarter of 2006.
New York Stock Exchange-listed Lockheed Martin Corporation announced it has
entered into a definitive agreement to acquire Maryland-based Aspen Systems
Corporation, a company active in the homeland security market.
The employee-owned information management company delivers a range of
business process and technology solutions primarily to civil agencies of the
US government. Terms of the transaction, which are not expected to have a
material impact on Lockheed Martin’s results of operations, financial
position or cashflows, were not disclosed.
The acquisition will strengthen Lockheed Martin’s capabilities in
information technology and technical services and expand its range of
federal information technology customers.
More than 90 per cent of Aspen Systems’ current revenue is generated from
the US government, predominantly from civil agency customers. The company’s
revenue was approximately US$165 million in 2004.
The transaction is subject to US government approvals, including a review
under the Hart-Scott-Rodino Antitrust Improvements Act, and satisfaction of
other customary closing conditions. It is expected that the transaction will
close by the first quarter of 2006.
Disclaimer
James Smith is an independent columnist for this web site. James Smith may
hold long or short positions in any of the stocks mentioned in this article
and those positions can change at any moment.
InvestorIdeas.com Disclaimer:
www.InvestorIdeas.com/About/Disclaimer.asp, InvestorIdeas is not
affiliated or compensated by the companies mentioned in this article. James
Smith is a freelance writer. Nothing in the articles should be construed as
an offer or solicitation or recommendation to buy or sell any specific
products or securities. Past performance does not guarantee future results.
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