McLean-based Science Applications International Corp. (SAIC) plans to divide itself into two publicly-traded companies.
The Fortune 500 company would spin off its business focused on government technical services and enterprise information technology.
“Our two new companies will be designed so that their businesses can be more differentiated and more competitive in their own space,” John Jumper, chairman and CEO, said in a statement. “More importantly, that addressable space will expand for each as we eliminate the burden of organizational conflicts of interest.”
SAIC is a scientific, engineering, and technology applications company with approximately 40,000 employees. It had revenues of approximately $10.6 billion for its fiscal year ended Jan. 31.
The spin-off is expected to occur in the latter half of next fiscal year. The plan is not expected to require a vote of the SAIC stockholders .
The board of directors decided to divide the company after completing a comprehensive strategic review.
SAIC said that, after the spin-off, two separate businesses would be:
• A technical services business focused on government technical services and enterprise IT. SAIC said this company would have a more efficient cost structure and be one of the largest, pure-play government services companies in the market. New business opportunities expected from the elimination of organizational conflict of interest would include: systems engineering and technical assistance (SETA), cost and financial analysis and program office support. Also, the company would expand its offerings to the intelligence community and civil agencies. Pro forma revenue for the company in the fiscal year ending Jan. 31, 2013 is estimated at $4 billion.
• A business focused on science and technology solutions in three high-growth markets: national security, engineering and health. SAIC said the elimination of elimination of organizational conflict of interest with SAIC’s services business will allow this company to have access to opportunities in Major Defense Acquisition Programs (MDAP) and Programs of Record (POR) in multiple Command, Control, Communications, Computers, and Intelligence (C4ISR) regimes, specifically Maritime ISR systems; U.S. Navy Airborne programs; Battlespace Awareness; Maritime Domain Awareness; Electronic Warfare (EW), and Missile Warning, as well as Logistics, Readiness and Sustainment Pro forma revenue for the fiscal year ending Jan. 31, 2013 for the solutions-focused business is estimated at $7 billion.
The two entities together are initially expected to pay a dividend that is approximately equal in sum to the current SAIC dividend.
The company has retained Citigroup Global Markets as its financial adviser.
SAIC’s current customers include the U.S. Department of Defense, the intelligence community, the U.S. Department of Homeland Security, other U.S. government civil agencies and certain commercial markets.
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