General Dynamics to Purchase CSRA in $9.6 Billion Deal

February 12, 2018

With an view of becoming a premier provider of high-tech information technology solutions to government technology services market, Geneal Dynamics announced on Feb. 12 that it is purchasing CSRA. "With approximately $9.9 billion in revenue and strong double-digit EBITDA [earnings before interest, taxes, depreciation, and amoritization] margins, the combined General Dynamics Information Technology (GDIT) and CSRA is well-positioned to serve its customers’ current and evolving mission requirements," General Dynamics stated. Under an agreement reached by the two companies, General Dynamics will acquire all outstanding shares of CSRA for $40.75 in cash, in a transaction valued at $9.6 billion, including the assumption of $2.8 billion in CSRA debt. “The acquisition of CSRA represents a significant strategic step in expanding the capabilities and customer base of GDIT,” said Phebe Novakovic, chairman and chief executive officer of General Dynamics. “CSRA’s management team has created an outstanding provider of innovative, next-generation IT solutions with industry-leading margins. We see substantial opportunities to provide cost-effective IT solutions and services to the Department of Defense, the intelligence community and federal civilian agencies. The combination enables GDIT to grow revenue and profits at an accelerated rate. It will allow us to deliver even more innovative, leading-edge solutions to our customers.” 

Larry Prior, chief executive officer and president of CSRA, said, “Our combination with General Dynamics represents an excellent outcome for CSRA’s stockholders, employees and customers. It builds on strong shared values, culture and a passion for serving our customers’ missions. We believe that this combination creates a clear, differentiated leader in the Federal IT sector, with a full spectrum of enterprise IT capabilities, including unique depth in Next-Gen offerings in conjunction with our commercial IT alliance partners.” General Dynamics expects the transaction to be accretive to GAAP earnings per share and to free cash flow per share in 2019, and expects to generate estimated annual pre-tax cost savings of approximately 2 percent of the combined company’s revenue by 2020. General Dynamics expects to complete the acquisition in the first half of 2018. The company said it would finance the purchase of CSRA through a combination of available cash and new debt financing. Upon completion of the transaction, General Dynamics anticipates retaining strong credit ratings with net debt of approximately $10.5 billion. The purchase is expected to generate run-rate pre-tax cost synergies of approximately 2% of combined sales by 2020, and be accretive to earnings and free cash flow per share in 2019, according to General Dynamics.

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