Leidos to combine with Lockheed Martin’s IS&GS business

Leidos Holdings Inc. of Reston, VA announced on January 26 that it has entered into a definitive agreement with Lockheed Martin pursuant to which Leidos will combine with Lockheed Martin’s realigned Information Systems & Global Solutions business (IS&GS) in a Reverse Morris Trust transaction.

With approximately $5 billion in sales and more than 16,000 employees worldwide, IS&GS has been a leading government services provider for more than 20 years.

“The combination of IS&GS with Leidos creates truly significant value for our shareholders, and brings together a $10 billion portfolio of solutions, mission IT, and technical services,” said Roger Krone, Leidos chairman and CEO. “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.”

The combination will result in Lockheed Martin shareholders receiving approximately 50.5 percent of the combined company on a fully diluted basis, with pre-transaction Leidos shareholders owning the balance. The transaction, which also includes a special cash payment of approximately $1.8 billion to Lockheed Martin, is valued at approximately $5.0 billion based on Leidos’ $55.22, 5-day volume weighted average stock price.

The transaction also contemplates that Leidos will pay a special dividend to its shareholders of approximately $1 billion, contingent on closing of the transaction. The special dividend to Leidos shareholders is expected to be funded through new borrowing by Leidos and cash on hand.

This combination is expected to add large, complex IT system implementation and operation experience, and additional federal and international IT solutions and services work to the Leidos portfolio, providing more venues to sell value added services such as cybersecurity and analytics.

Source: Leidos Holdings Inc.