U.S. Defense contractor CACI International Inc offers to merge with peer CSRA Inc

The net run-rate cost synergies in CACI’s offer beats that CRSA’s deal with General Dynamics.

In a move aimed at disrupting General Dynamics Corp acquisition of CSRA Inc, a large U.S. defense contractor, its peer CACI International Inc stated it has offered to merge with CSRA Inc.

In February 2017, CSRA had agreed to sell itself to General Dynamics for $40.75 per share in cash in order to position itself to garner more defense contractors as the U.S. government, under U.S. President Donald Trump, pushes for more government spending.

As a result, shares of CACI have seen a jump by more than a fifth in the last four months, thus emboldening the Arlington, Virginia-based firm to use its stock as currency to pursue the deal.

Incidentally, CACI’s market capitalization is $3.9 billion in comparison to CSRA’s $6.7 billion.

CACI’s $44 per share offer for CSRA consists of $15 per share in cash and 0.184 CACI shares for each CSRA share, said CACI in a statement. Under the terms of its offer, CSRA shareholders would own 55% of the combined company.

As per the firm’s calculation, it expects to realize $165 million annually in net run-rate cost synergies which beats the cost benefits of CRSA’s deal with General Dynamics. Further, it has also argued that its stock makes the deal a lot more attractive to CSRA shareholders.

On Sunday, CSRA said its board of directors, in consultation with its legal and financial counsels, will carefully review CACI’s offer. Incidentally, General Dynamics’ offer is scheduled to expire on April 3.

General Dynamics did not respond to requests for comment.

CSRA provides information technology and related services to the U.S. Department of Defense and the intelligence community.

Further, CACI has raised its 2018 earnings per share (EPS) guidance from its previous range of $10.95 to $11.19 range to a new range of $11.26 and $11.50.

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