Arlington, Virginia-basedÂ CACI InternationalÂ (NYSE: CACI)Â seeks aÂ wider presenceÂ in the intelligence community and enterprise information technology markets through itsÂ $550 million acquisitionÂ ofÂ L-3 Communications‘ (NYSE: LLL) government services segment, Â CACI CEO Ken Asbury told investors Tuesday.
Asbury also said in the call with analysts to discuss the deal that by CACI’s 2017 fiscal year, the company aims to have its operating margin aligned withÂ that of the services business.
“We have pursued the potential of NSS for several years now starting well before (L-3) stated how they wanted to do things.Â WeÂ didn’t see a lot of overlap in NSS pipeline, ” Asbury said to investors.
CACI, which runs its fiscal calendar on a July-June basis, reported an operating margin of 7.8 percent in its most recent earnings statement for the fiscal 2016 first quarter and NSS’ last stated margin wasÂ 3.6 percent as of L-3’s third quarter.
CACI estimates its revenue with NSS to be approximately $4.4 billion as of Sept. 30, according to investor slides from the company.
The segment that operates as L-3 National Security Solutions posted $1.2 billion in 2014 revenue with nearly 20 percent of its customer mix in intelligence agencies, 54 percent in the Defense Department and the remaining 26 percent in the federal civilian, international and other markets.
By comparison, CACI reported 66 percent of its revenue as from DoD in its fiscal year 2016 first quarter earnings statement with 27 percent in the civilian arena and the other 7 percent listed as commercial and other.
Asbury toldÂ investors he also anticipates more stability in theÂ government services market with lawmakers working on a new budget agreement and appropriation measures coming into place.
“We’re seeing the market has settled to a certain set of rates for those of usÂ out ofÂ manufacturing environmentsÂ so it’sÂ easier for us to adjust. The challenge is with new rates how do we position for new or takeaway business and see if it’s contributing to growth, ” Asbury said.
“TheÂ phenomenon we’re seeing in market place is pure-play companiesÂ in our space are showing the ability to overcome budget difficulties and see modest growth.”
As of 1:30 p.m. Eastern time, shares in CACI were up 3.6 percent to $102.92 versus the 52-week high ofÂ $104.09.