WASHINGTON — CACI has finalized its agreement to purchase National Security Solutions from L-3, CACI announced during a conference call Tuesday.
The $550 million purchase is expected to be completed in the third quarter of fiscal 2016, said CACI President and CEO Ken Asbury during the call, which also featured CFO Tom Mutryn and COO and President of US Operations John Mengucci.
“This is an exciting acquisition for CACI,” Asbury said. “NSS carries a high strategic value to CACI.”
NSS will strengthen CACI’s government-information solutions and services, he said.
With 4,000 employees, NSS acts as the prime contractor on 90 percent of its business, with the US Defense Department comprising 54 percent of its customer base. Other government agencies, particularly intelligence customers, make up another 20 percent of its customer base.
In a note to investors, Capital Alpha Partners analyst Byron Callan noted that NSS should add $1 billion to CACI’s annual sales. This brings CACI’s total sales to an estimated $4.4 billion, putting it in the same neighborhood as Booz Allen Hamilton, Cyber Security Research Alliance, Leidos and SAIC.
“We expect no major regulatory hurdles to this deal given the fragmented nature of the defense services market,” Callan noted. “Arguably, CACI knows more about managing a services business than L-3, which has been divesting services business and focusing on products.”
L-3 is in the process of reshaping its portfolio to focus on markets where it already has a strong position, improving top-line growth and margin profile, L-3 Chairman and CEO Michael Strianese said in a prepared statement.
“The sale of L-3 NSS to CACI aligns directly with this commitment and further sharpens our focus on our higher-returning defense electronics, communications and ISR businesses,” he said.