Leidos Strikes $1.65B Cash Deal for Dynetics; Roger Krone Quoted

Jeff Brody
Roger Krone

Leidos (NYSE: LDOS) has agreed to acquire Huntsville, Ala.-based technology services contractor Dynetics for approximately $1.65B in cash as part of efforts to expand its portfolio of offerings and further build up its position in intelligence, civil and defense markets.

The transaction is expected to be completed in the first quarter of 2020 and help advance opportunities within the Leidos Innovations Center that develops technologies to meet clients’ requirements, Leidos said Tuesday.

“Dynetics is an innovative company with a talented team that will deepen our identity as a national security systems provider and enhance our platform to deliver sustainable, profitable growth,” said Roger Krone, chairman and CEO of Leidos and a 2019 Wash100 winner. “The addition of Dynetics will significantly increase our capabilities for rapid prototyping and agile system integration and production, enhancing our overall offerings and services to customers.”

Leidos will operate Dynetics as a wholly owned subsidiary upon the deal’s completion. Dynetics CEO David King will lead the subsidiary and directly report to Krone.

The deal will broaden Leidos’ footprint in Huntsville, expand relationships with government clients and provide the company access to Dynetics’ workforce of over 1K engineers and 1K technical specialists.

John Song

The transaction is “indicative of how Leidos is investing on innovation and expanding their presence in the high growth markets of hypersonics, directed energy, advanced sensors and space solutions,” John Song, a managing director at Baird, told GovCon Wire.

Both companies’ boards of directors have approved the acquisition, which is expected to be accretive to Leidos’ EBITDA margins, non-GAAP diluted earnings per share and revenue growth upon the deal’s completion. Leidos will use its cash on hand and incremental debt to fund the transaction.

Baird served as Leidos’ exclusive financial adviser in the transaction, while Skadden, Arps, Slate, Meagher & Flom acted as legal adviser to the company.

Jefferies and King & Spalding respectively served as financial and legal advisers to Dynetics in the deal. Grant Thornton acted as accounting adviser, while Avascent provided strategic industry advisory services to Dynetics as part of the transaction.

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