Home / M&A Activity / DXC to Merge US Public Sector Business With Vencore, KeyPoint; Mac Curtis to Lead Combined Firm

DXC to Merge US Public Sector Business With Vencore, KeyPoint; Mac Curtis to Lead Combined Firm

Mac Curtis

DXC Technology (NYSE: DXC) has agreed to merge its U.S. public sector business with Vencore and KeyPoint Government Solutions to establish a “top five” independent, publicly traded contractor within the government information technology services sector.

All three companies expect to complete the merger by the end of March 2018, subject to regulatory approvals and other customary closing conditions, DXC said Wednesday.

The combined company is expected to have more than 14,000 employees and generate approximately $4.3 billion in annual revenue with a focus on cybersecurity, big data analytics, systems engineering, enterprise IT and cloud engineering services.

Mac Curtis, president and CEO of Vencore, will become CEO of the combined entity.

Marilyn Crouther

Curtis, an inductee into Executive Mosaic‘s Wash100 for 2017, said he is excited to lead the combined entity that will aim to leverage the three companies’ intellectual property, deep mission domain knowledge and IT services portfolio in support of clients’ requirements.

Marilyn Crouther, senior vice president and general manager of DXC’s U.S. public sector business and a Wash100 inductee, will serve as chief operating officer of the future independent company.

Mike Lawrie, chairman, president and CEO of DXC, will chair the board of directors while  Ramzi Musallam, CEO and managing partner at Veritas Capital, will serve as a board member.

Private equity firm Veritas Capital’s affiliates currently own Vencore and KeyPoint and plans to continue to invest in the new firm.

DXC will spin off its USPS business and then merge it with Vencore and KeyPoint under a tax-free Reverse Morris Trust transaction.

Stockholders of the selling company will get shares in USPS through the spinoff and own approximately 86 percent of the new company’s common shares upon the deal’s closure.

Veritas Capital-managed funds and its affiliates will receive $400 million in cash and will own 14 percent of the shares in the combined entity upon the transaction’s completion.

DXC will receive $1.05 billion in cash consideration from the spinoff and will use the proceeds for general corporate purposes such as debt reduction and share repurchasing activities.

DXC intends to continue to serve approximately 6,000 international clients as well as state and local government customers, specifically those that deal with state Medicaid programs.

Shareholders of KeyPoint and Vencore have cleared the merger plan, which also received approval from DXC’s board of directors.

The planned merger came months after DXC officially launched in April as a publicly traded firm that formed through the combination of Computer Sciences Corp. with Hewlett Packard Enterprise’s (NYSE: HPE) enterprise services segment.

Guggenheim Securities and Latham & Watkins respectively serve as financial adviser and primary legal counsel to DXC.

Skadden, Arps, Slate, Meagher & Flom serve as DXC’s tax counsel, while Wiley Rein and Crowell & Moring act as governmental counsel to the firm.

Stone Key Partners and Covington & Burling respectively act as financial adviser and governmental counsel to Veritas Capital, Vencore and KeyPoint, while Schulte Roth & Zabel and Skadden, Arps, Slate, Meagher & Flom both serve as primary legal counsel to the three companies.

Chantilly, Virginia-based Vencore has a workforce of 3,750 employees and provides cybersecurity, analytics, engineering and other IT services to U.S. government clients.

Loveland, Colorado-based KeyPoint operates with 3,500 employees and delivers investigative and risk mitigation services to defense, intelligence, federal and civilian agencies.

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