BY Richard Summerfield
US defence contractor General Dynamics Corp is to acquire CSRA Inc. for about $9.6bn – including the assumption of $2.8bn in CSRA debt. The deal will see General Dynamics pay $40.75 per CSRA share – a 32 percent premium to its Friday closing price of $30.82. The transaction is expected to close in the first half of 2018.
The acquisition of CSRA is General Dynamics' largest ever deal, easily eclipsing the $5.3bn the company paid for Gulfstream Aerospace Corporation in 1999.
“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 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 Defence, 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 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 deal for CSRA comes at a delicate time for General Dynamics. The company’s revenue over the last two quarters has disappointed investors. General Dynamics reported sales of $31.35bn in the year ended 31 December. CSRA generated revenue of $4.99bn in the fiscal year ended 31 March. Ninety-four percent of CSRA’ revenue last year was derived from US government contracts.
CSRA provides IT, mission and operations-related services to the Department of Defence, the intelligence community and homeland security. With defence spending expected to rise in the coming years, the timing of the deal for CSRA will likely be advantageous for General Dynamics.