CSC of Falls Church, VA announced on August 31 that it has entered into a definitive agreement to combine its government services unit, Computer Sciences Government Services (CSGov), with SRA upon the spin-off of that unit, plans for which were announced in May.
SRA is owned by a shareholder group led by Providence Equity Partners and SRA’s founder, Dr. Ernst Volgenau, as well as members of its management team. The transaction with SRA is targeted to close before the end of November 2015, upon the separation of CSC’s government services unit. That separation is intended to qualify as a tax-free transaction to CSC shareholders.
The combined company, to be named prior to closing, will become the largest pure-play IT services provider serving the U.S. government sector, with combined FY15 revenues of approximately $5.5 billion, nearly 19,000 employees and among the industry’s leading profit margins.
“The combination of CSGov and SRA is an important strategic move to best position the combined company as the government IT services industry consolidates,” said Mike Lawrie, CSC’s president and CEO. “We believe CSGov’s next-gen software platforms and solutions – together with SRA’s go-to-market capabilities and customer intimacy – will deliver significant benefits to U.S. government clients, open new opportunities for employees of both firms and create substantial value for shareholders.”
The combination of CSGov and SRA will bring together highly complementary IT capabilities, with approximately three-quarters of revenues generated from cybersecurity, software development, cloud and IT infrastructure. Additional revenues will be derived from domain-specific professional services, including intelligence analysis, bioinformatics and health sciences, energy and environmental consulting, and enterprise planning and resource management.
“We are delighted to enter into a business combination that is strategically compelling, and one that strengthens the next generation IT capabilities the combined organization can offer to its customers,” said Chris Ragona, managing director of Providence Equity Partners, SRA’s controlling shareholder. “The two businesses are a natural fit and we are excited by the value creation opportunities that can be realized through this combination.”
Mike Lawrie will serve as Chairman of the Board of the combined company. Lawrence Prior, executive vice president and general manager of CSC’s North American Public Sector unit, will be chief executive officer of the company upon completion of the spin-off and transaction with SRA. Additional members of the new company’s management team drawn from both companies will be named at later dates as the integration planning progresses.
The headquarters of the combined company is expected to remain in Northern Virginia.