Science Applications International Corp. has agreed to buy Unisys’ federal business unit for $1.2B in cash, SAIC announced on Thursday. The transaction multiple of approximately 13x LTM 9/30/19 Adjusted EBITDA(5) will add greater value to SAIC and will provide a significant premium to Unisys’ trading multiple.
“This exciting opportunity advances our strategy by building on our modernization capabilities, increasing customer access, accelerating growth and enhancing shareholder value…The financial benefits of acquiring Unisys Federal are compelling, including accretion of adjusted EBITDA margins, non-GAAP earnings per share, and cash generation,” said Nazzic Keene, CEO of SAIC and 2020 Wash100 Award recipient.
SAIC expects the deal to enhance its capabilities in modernizing IT, cloud migration, managed services, development, security and operations. The company also seeks to grow its portfolio of intellectual property and technology-driven products to support federal customers. In addition, SAIC aims to expand its access to current and new customers with strategic initiatives to enhance new business opportunities.
“Under the leadership of Venkatapathi “PV” Puvvada, we have become known as a true innovator in the federal market, leveraging powerful intellectual property and a world-class team. This transaction will allow us to significantly enhance our balance sheet, which will create increased operational flexibility that will ultimately position us to better serve our clients while delivering increased value to investors,” said Unisys Chairman and CEO Peter Altabef.
With the sale, Unisys will use the net proceeds to pay down debt and reduce pension obligations to improve its balance sheet, U.S. pension funded status and financial flexibility.
Among the benefits that Unisys will gain from the sale, the unfunded pension deficit is expected to be reduced from $1.74B as of year-end 2018 to approximately $1.14B on a pro forma basis. Unisys will also have the flexibility to make additional discretionary contributions to future funding requirements beyond 2022.
The transaction was unanimously approved by SAIC’s and Unisys’ boards of directors and is expected to close in the first half of 2020, subject to customary closing conditions. SAIC will fund the transaction through cash and incremental debt.
The acquisition is expected to close by the end of SAIC’s first quarter of fiscal year 2021, ending May 1, 2020, following customary closing conditions, including HSR regulatory clearance. The businesses will continue to operate independently until the transaction closes.
SAIC is a premier technology integrator solving our nation’s most complex modernization and readiness challenges across the defense, space, federal civilian, and intelligence markets. Our robust portfolio of offerings includes high-end solutions in systems engineering and integration; enterprise IT, including cloud services; cyber; software; advanced analytics and simulation; and training.
With an intimate understanding of our customers’ challenges and deep expertise in existing and emerging technologies, we integrate the best components from our own portfolio and our partner ecosystem to rapidly deliver innovative, effective, and efficient solutions.
Unisys is a global information technology company that builds high-performance, security-centric solutions for the most demanding businesses and governments. Unisys offerings include security software and services; digital transformation and workplace services; industry applications and services; and innovative software operating environments for high-intensity enterprise computing.