Engility acquires TASC

Engility 112Engility Holdings, Inc. announced on February 26 that it has completed its acquisition of TASC, Inc. in an all-stock transaction valued at approximately $1.3 billion, including the assumption of net debt. This transaction creates a leading government services provider with a customer footprint that spans the federal services market, according to Engility.

“This transformational acquisition accelerates our growth strategy to further diversify our customer base, enhance our capabilities, add scale to our business, and increase our addressable market,” said Engility President and CEO Tony Smeraglinolo. “In addition to these strategic benefits, this acquisition offers many compelling financial characteristics including significantly improving our cash flow and adjusted earnings. We believe our differentiated business model will benefit TASC’s intelligence and space customers, and we look forward to leveraging the strengths of both companies to create additional value for our customers, employees and shareholders.”

“Our new combined company ensures pricing and rates for customers that address their affordability requirements,” saidJohn P. Hynes Jr., Engility’s Executive Vice President and Chief Operating Officer. “With more than 10,000 professionals dedicated to supporting federal missions of national importance, we will continue to provide customers with the same great service they have come to expect.”

Founded in 1966, TASC is a leading provider of enterprise systems engineering, mission-enabling architectures and value-based solutions for the national security and public safety markets. TASC has a substantial presence in the intelligence community, space and other markets in which Engility was underrepresented. TASC has approximately 3,700 employees and is a prime contractor on approximately 85 percent of its work.

Engility now has a more diversified and balanced portfolio across the government services industry, according to the company. The combined company has a leadership position in the Intelligence community and high-end technical consulting markets. In addition, the defense market comprised approximately 61 percent of Engility’s revenue in 2014. Upon completion of the TASC merger, the company expects defense to comprise approximately 47 percent of its revenue base. The balance of its business will be split almost equally between its Intelligence and Federal Civilian agency customers.

TASC brings more than 850 contracts and task orders to the combined company, which together will have more than 2,000 contracts and task orders. TASC’s contracts and task orders have minimal overlap with Engility’s current contract vehicles and customers. TASC enhances Engility’s existing broad services offerings by adding capabilities in intelligence analysis, space systems architecture analysis, cyber forensics and cybersecurity, intelligence, surveillance and reconnaissance operations, geospatial intelligence, data analytics, enterprise transformation, test and evaluation, secure cloud computing and mobile applications.

In addition to the Intelligence community, the combined company now has a meaningful presence and longstanding relationships with an attractive and expanded customer set, including the U.S. Air Force, NASA, and theDefense Information Systems Agency, among others. The transaction also enhances the combined company’s position with the Department of Homeland Security, Defense Threat Reduction Agency, Federal Aviation Administration, Missile Defense Agency and Naval Sea Systems Command. This transaction substantially expands Engility’s addressable opportunities in the government services market.

The combination of Engility and TASC is expected to generate approximately $35 million in cost synergies by year-end 2016, with a portion of these synergies achieved during 2015. The combined company expects to achieve approximately$50 million in run rate cost synergies by 2018. Engility and TASC expect to realize these savings by implementing “best practices” throughout the combined company’s operations and by eliminating duplicative costs.

The combined company’s senior leadership team is composed of executives from both Engility and TASC. Tony Smeraglinolo is the company’s President and Chief Executive Officer, and John Hynes Jr. is the company’s Chief Operating Officer. David Savner and Peter A. Marino are serving as non-executive co-chairmen of the combined company.

As previously disclosed, Engility’s Board of Directors has been expanded to 11 members from seven members and is composed of the existing Engility directors and the following four directors designated by Birch Partners, which is controlled by investment funds affiliated with Kohlberg Kravis Roberts & Co. L.P. and General Atlantic LLC: Peter A. Marino, David M. Kerko, Steven A. Denning and Lynn A. Dugle.

Source: Engility Holdings, Inc.