Tuesday, July 23, 2024

Defense contractor General Dynamics to buy CSRA for $9.6 billion

by BIZ. Staff

A major defense contractor is spending nearly $10 billion to acquire tech giant CSRA.

General Dynamics will spend $9.6 billion, including the assumption of $2.8 billion in CSRA debt, to acquire the company it was announced Monday morning.

CSRA owns the Integrated Technology Center and Customer Engagement Center in Bossier City.

“The acquisition of CSRA represents a significant strategic step in expanding the capabilities and customer base of GDIT,” said Phebe Novakovic, chairman and chief executive officer of General Dynamics. “CSRA’s management team has created an outstanding provider of innovative, next-generation IT solutions with industry-leading margins. We see substantial opportunities to provide cost-effective IT solutions and services to the Department of Defense, the intelligence community and federal civilian agencies. The combination enables GDIT to grow revenue and profits at an accelerated rate. It will allow us to deliver even more innovative, leading-edge solutions to our customers.”

Larry Prior, chief executive officer and president of CSRA, said, “Our combination with General Dynamics represents an excellent outcome for CSRA’s stockholders, employees and customers. It builds on strong shared values, culture and a passion for serving our customers’ missions. We believe that this combination creates a clear, differentiated leader in the Federal IT sector, with a full spectrum of enterprise IT capabilities, including unique depth in Next-Gen offerings in conjunction with our commercial IT alliance partners.”

The Trump administration’s increase in defense spending is being credited as a major reason for the move.

President Donald Trump signed a budget bill last week that provides $700 billion for the Pentagon. This is a $94 billion increase and the the biggest year-over-year increase since 2003.

The transaction is expected to close in the first half of the year.

Novakovic continued, “I am very pleased to welcome CSRA’s talented leadership team and employees. This combination brings together two industry leaders with highly complementary capabilities to create a strong business with approximately $9.9 billion in revenue and double-digit EBITDA margins in the consolidating Government Technology Services sector.”

Under the terms of the agreement, which has been unanimously approved by the Board of Directors of both companies, a subsidiary of General Dynamics will commence a cash tender offer to purchase all of the outstanding shares of CSRA common stock for $40.75 per share in cash. The tender offer is subject to customary conditions, including antitrust clearance and the tender of a majority of the outstanding shares of CSRA common stock. Following successful completion of the tender offer, General Dynamics would acquire all remaining shares not tendered in the offer through a merger at the same price as in the tender offer.

The transaction is expected to be financed through a combination of available cash and new debt financing. Upon completion of the transaction, General Dynamics anticipates retaining strong credit ratings with net debt of approximately $10.5 billion.

Shares of CSRA Inc. increased almost 32 percent Monday morning following the announcement.

CSRA and General Dynamics Corp. are based in Falls Church, Virginia.

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