KBR to acquire Wyle

thKBR, Inc. of Houston, TX announced on May 23 it has entered into a definitive agreement to acquire Wyle, Inc., a leading provider of specialized engineering, and professional, scientific and technical services primarily to the U.S. federal government.

Wyle delivers an array of cutting edge, custom solutions that drive mission success for customers in the U.S. Department of Defense, NASA and other federal agencies. Wyle’s expertise includes systems and sustainment engineering, program and acquisition management, life science research, space medical operations, information technology and the testing and evaluation of aircraft, advanced systems and networks.

This acquisition will combine KBR’s strengths in international, large-scale government logistics and support operations with Wyle’s specialized technical services, largely focused in the contiguous U.S. The addition of Wyle’s highly advanced capabilities significantly expands KBR’s global Government Services offerings, moving the business towards the high growth, more specialized, technology- and science-driven sources of long-term annuity type revenues with greater differentiation and higher margins, all of which are consistent with our previously announced strategy. Together with Wyle, KBR will now provide capabilities that span the full spectrum of the life-cycle of aerospace and defense programs from research and development, through test and evaluation, to operations, maintenance, and field logistics.

“Expanding our government services capabilities and service offerings into more profitable and complementary market segments is a key part of KBR’s growth strategy,” said Stuart Bradie, president and CEO of KBR, Inc. “This strategic acquisition creates the equivalent of a global $2 billion Government Services organization with full service capabilities drawing on the best in class capabilities of both organizations.”

“Adding Wyle’s highly specialized and differentiated offerings to our global government services portfolio improves KBR’s overall risk profile by expanding into other government funding sources for higher-margin and largely cost-reimbursable work,” Bradie continued. “This acquisition provides us with broader relationships with U.S. Government clients and grows our U.S. presence by acquiring a highly respected U.S.-focused franchise. The acquisition is expected to be accretive in the first year and provide longer term synergistic opportunities in markets where KBR’s large-scale logistics and project management capabilities combine with Wyle’s specialized technical capabilities,” said Bradie.

Wyle will become a KBR business unit within KBR’s Government Services segment and will maintain much of its current structure to ensure business continuity. KBR and Wyle’s management teams will be highly focused on a successful transition which retains Wyle’s greatest asset, its 3,800 professionals, while also capitalizing on the new opportunities of the combined company across all of Government Services regions including the U.S., Europe, Middle East and Africa (EMEA), and Asia Pacific (APAC). As of year-end 2015, Wyle’s funded backlog was $440 million with an additional $1.1 billion of orders not yet funded, but expected.

One hundred percent of Wyle’s business will be acquired through the acquisition of shares pursuant to a merger sub-transaction structure. The transaction price to KBR is $570 million, after adjustments for approximately $30 million of acquired tax benefits, and subject to other customary adjustments, including for net working capital, net cash and indebtedness of Wyle. The transaction is expected to be immediately accretive to KBR’s earnings per share and will initially be funded by utilizing KBR’s existing line of credit facility and approximately $200 million in cash.

The transaction has been unanimously approved by the KBR Board of Directors and is subject to certain regulatory approvals and customary closing conditions. The closing is expected to occur in the third quarter of 2016.

Source: KBR