On Tuesday, Leidos Holdings Inc. announced it will acquire Bethesda, Md.-based Lockheed Martin Corp’s information systems and government services business in a tax-free deal valued at $5 billion. The division has about $5 billion in sales and more than 16,000 employees globally, IS&GS has been a leading government services provider for more than 20 years. Lockheed states the move will allow them to focus more on its core aerospace and defense operations.
With the acquisition, Leidos annual revenues is expected to reach more than $10B making it one of the largest government IT contractors. “The combined company will be a more diversified leader in the markets we serve, giving us the scale and access to markets that enable further growth. The new company will be better able to offer cost-effective solutions to our customers. I look forward to welcoming the talented employees from IS&GS who will join the Leidos team – they will play a critical role in our future success,” said Roger Krone, Leidos chairman and CEO.
Financial Details
Lockheed Martin Corp. will receive a special one-time payment of $1.8 billion. Leidos is expected to pay a special dividend to its shareholders of approximately $1 billion, contingent on closing of the transaction. Upon closing of the merger, Lockheed Martin shareholders will receive approximately 50.5 percent of Leidos shares, on a fully diluted basis, and pre-transaction Leidos shareholders will own the balance of the combined company’s shares.
Roger Krone will continue as Chairman and CEO of Leidos. Pursuant to the transaction agreement, Lockheed Martin will be entitled to designate three new directors to serve on the Leidos board of directors. Jim Reagan will continue to serve as CFO of Leidos. Leidos headquarters will remain in Reston, Va. and the company will maintain a significant presence in Gaithersburg, Md. It is expected that members of the IS&GS senior staff will join the Leidos leadership team.
