[ad_1]
What happened
Actions of Perspecta (NYSE: PRSP) jumped more than 10% at the opening Wednesday after the government IT company announced a deal to acquire for more than $ 7.1 billion. The stock was already up thanks to the buyout rumors, with the buyback price a nearly 50% premium over where the shares were trading in November before the rumors.
So what
Perspecta, an IT services provider for government clients, said ahead of the market opening on Wednesday that it had agreed to sell to private equity firm Veritas Capital. The terms of the agreement provide that holders of Perspecta will receive $ 29.35 per share in cash for each share held.
Veritas already owns 14.5% of Perspecta, a company created in June 2018 through a three-way merger involving two Veritas holdings. The private equity firm intends to merge Perspecta into Peraton, a separate Veritas holding that is also in the process of acquiring the IT business of Northrop Grumman.
Image source: Getty Images.
The deal follows a disappointing year for Perspecta, which in February 2020 lost its most important contract. The US Navy has chosen Read the funds modernize and maintain its computer networks, a contract which previously represented approximately 15% of Perspecta’s total revenue.
The loss of the Navy contract was a reminder of the importance of scale and volume for defense contractors. Combined with Peraton and the assets of Northrop Grumman, Perspecta will be part of a larger and more diverse company better able to handle the blow of losing an individual contract award.
Now what
The deal comes at a time when the generally dormant government IT sector is in the spotlight thanks to Palantir Technologies, which went public in late September and saw its shares jump almost 270% in the months that followed. Palantir jumped in part because investors are bullish about the growth in government IT spending in the coming years, which should bode well for the industry as a whole.
As the Perspecta owners have discovered, this is an industry where size and scale matter. With rising valuations, I would expect further consolidation in the coming quarters, with ManTech International and FOR among the likely participants as buyers or sellers as companies attempt to gain market share and better compete with new entrants like Palantir and Peraton.
[ad_2]
Source link