SAIC Beefs Up Fed Government Biz With Unisys Federal Acquisition

The deal, worth about $1.2 billion, gives Science Applications International Corp. a strong digital transformation team to add to its federal business, while Unisys gets a way to pay down a significant amount of debt.

Global systems integrator Science Applications International Corp., or SAIC, on Thursday said it plans to acquire Unisys Federal, an operating unit of Unisys.

The acquisition of Unisys Federal is a deal valued at $1.2 billion, or $1.025 billion because of the present value of tax assets of about $175 million.

The deal is expected to close before May 1, which is the end of SAIC's first fiscal quarter 2020.

[Related: Unisys CEO Peter Altabef On Security, Cloud, IoT]

For Reston, Va.-based SAIC, the deal brings new talent and technology with experience providing scalable, repeatable solutions to U.S. federal civilian and military agencies in such areas as infrastructure modernization, cloud migration, managed services, and enterprise IT-as-a-service.

For Blue Bell, Pa.-based Unisys, the sale presents an opportunity to sell part of its business at what it calls a "significant premium" to the company's trading multiple, as well as cash to pay down debt and reduce pension obligations and in the process improve its balance sheet, U.S. pension funded status, and overall financial flexibility.

This includes cutting about $600 million from its unfunded pension deficit, and redeeming $440 million of senior secured notes.

Unisys said the Unisys Federal unit includes over 1,900 employees and revenue for the 12 months ended Sept. 30, 2019 of about $689 million.

Unisys and SAIC spokespeople were not available to respond to CRN requests for further information by press time.

However, SAIC CEO Nazzic Keene, in a prepared statement, said the addition of Unisys Federal will make SAIC a leading digital transformation services and solutions provider to the Federal government.

"This exciting opportunity advances our strategy by building on our modernization capabilities, increasing customer access, accelerating growth and enhancing shareholder value. The financial benefits of acquiring Unisys Federal are compelling, including accretion of adjusted EBITDA margins, non-GAAP earnings per share, and cash generation," Keene said.

Unisys Chairman and CEO Peter Altabef in a prepared statement called the sale of Unisys Federal a tribute to the unique and attractive business that Unisys' U.S. Federal colleagues have built over time.

"Under the leadership of Venkatapathi "PV" Puvvada, we have become known as a true innovator in the federal market, leveraging powerful intellectual property and a world-class team. This transaction will allow us to significantly enhance our balance sheet, which will create increased operational flexibility that will ultimately position us to better serve our clients while delivering increased value to investors," Altabef said in that statement.