Leidos [LDOS] on Tuesday afternoon said it has agreed to acquire advanced technology research, development, and prototyping company for $1.65 billion in cash, adding capabilities in rapid prototyping and high growth areas such as hypersonics, space and weapons systems.
The deal is expected to close in the first quarter of 2020 subject to regulatory approvals. Both companies’ boards have approved the deal.
Leidos said the acquisition will be immediately accretive to its sales, adding about $1 billion in annualized revenue next year, and over $110 million in adjusted operating income.
“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,” Roger Krone, chairman and CEO of Leidos, said in a statement. “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.”
Dynetics has capabilities in hypersonics, particularly offensive weapons, small glide munitions, directed energy, an area that Leidos already has expertise, space solutions, unmanned and counter unmanned aircraft systems, intelligence and electronic warfare, and radar.
In hypersonics, one of the Defense Department’s most pressing priorities, Alabama-based Dynetics is a prime contractor for the Common Hypersonic Glide Body and a subcontractor on the Long Range Hypersonic Weapon.
The company’s sales are pretty evenly distributed, with weapons technology accounting for about 30 percent of revenue, hypersonics and space accounting 25 percent, intelligence and electronic warfare 25 percent, and avionics, unmanned and other solutions 20 percent.
Dynetics, which has 2,300 employees, including more than 1,500 with security clearances, brings with it more than 350,000 square feet of production space, allowing the company to provide its customers with solutions from the concept to production stages. The company is also known for its rapid prototyping and agile manufacturing and integration capabilities.
Dynetics also complements Leidos’ customer base, including the Army, Defense Intelligence Agency, the Defense Advanced Research Projects Agency, NASA, U.S. Special Operations Command, and the Army Rapid Capabilities and Critical Technologies Office.
“Together, we will advance our strategy of solving the toughest scientific and engineering problems by leveraging our collective strengths, driven by a shared commitment to innovation,” Krone also stated.
Dynetics is based in Huntsville, a strategic location for defense work and increases Leidos’ footprint there. The company’s senior management and CEO will remain with the company and report to Krone.
Dynetics’ financial advisor on the deal is Jefferies and Leidos is being advised by Baird.
Leidos said it will fund the deal with cash on hand and incremental debt.