Amentum to acquire PAE for $1.9B

All-cash deal for Falls Church contractor expected to close in Q1 2022

Published October 25, 2021 by Richard Foster

Falls Church-based government contractor PAE Inc. (Pacific Architects and Engineers) has agreed to be acquired by an affiliate of Germantown, Maryland, aerospace defense contractor Amentum in a $1.9 billion all-cash deal.

The transaction is expected to close by the end of the first quarter of 2022, at which time PAE will become a wholly owned affiliate of Amentum. A Fortune 1000 company, PAE employs about 20,000 workers across approximately 60 nations; Amentum has 34,000 employees stationed in all 50 states and 105 foreign nations and territories.

PAE shareholders will be entitled to receive $10.05 per share in cash upon the closing of the acquisition, which is subject to shareholder approval and other customary closing conditions, including regulatory approvals. The share purchase price is approximately 70% greater than PAE’s closing price on Oct. 22, 2021, the last trading day prior to the Amentum deal’s announcement.

“I believe joining the capabilities and resources of PAE and Amentum will benefit the customers and employees of both companies. This transaction creates new opportunities for the technology innovation our customers need to drive their critical missions,” PAE interim CEO and President Charlie Peiffer said in a statement issued Monday. “Aided by an attractive demand environment and PAE’s diversification across its customer base, contract portfolio and geographic reach, combining with Amentum is expected to provide our customers a wide array of capabilities and services via a broad range of contracting vehicles. Furthermore, this transaction should provide strong growth opportunities in terms of career development for our employees.

“Having a similar mission-oriented culture and creating new opportunities for our employees while maximizing shareholder value were of significant importance in the selection criteria for partnership in PAE’s next chapter,” Peiffer continued. “We believe that joining with Amentum will enable PAE’s talented workforce to deliver even more innovative solutions to our customers.”

Marshall Heinberg, chairman of PAE’s board of directors, praised the deal, calling it “a historic milestone in PAE’s legacy of service to the U.S. government spanning over 66 years.”

PAE’s board unanimously recommended that its stockholders approve and adopt the acquisition agreement, though under the terms of the agreement, PAE can solicit alternative acquisition proposals through Nov. 29, subject to a “break fee.”

PE Shay Holdings LLC, an affiliate of California-based private equity firm Platinum Equity that owns approximately 22.5% of PAE’s outstanding shares, has agreed to vote its shares in favor of the acquisition by Amentum.

Founded in California in 1955 by engineer Edward Shay, PAE was acquired in 2006 by Lockheed Martin Corp., which moved PAE’s headquarters to Virginia. The company was sold to Lindsay Goldberg and then Platinum Equity before debuting as a publicly traded company on the Nasdaq in 2020.

Morgan Stanley & Co. LLC and Raymond James & Associates Inc. provided financial advisory services to PAE’s board for the merger discussions. Goodwin Procter LLP, Morgan, Lewis & Bockius LLP and Nichols Liu LLP are serving as legal advisers to PAE for the transaction. Cravath, Swaine & Moore LLP is providing legal counsel to Amentum, with Arnold & Porter Kaye Scholer LLP acting as regulatory and government contracts counsel.