LONDON: Serco Group, the international service company, has announces that it has entered into a definitive Asset Purchase Agreement to acquire for $225 million the Naval Systems Business Unit (NSBU) and a small number of related contracting entities from Alion Science & Technology Corporation.
[the_ad id=”32940″]Naval Systems Business Unit (NSBU) is a leading provider of naval design, systems engineering, as well as production and lifecycle support services to the US Navy, US Army and Royal Canadian Navy. In the 12 months to September 2018 NSBU had revenues of $336 million, which compares with Serco’s North American Defence revenues in 2018 of $453 million; NSBU has an order book of around $600 million and a new business pipeline of over $2 billion.
Commenting on the Acquisition, Rupert Soames, Serco Group Chief Executive, said: “This is an important step for Serco which materially adds to the scale and capability of our US defence business, and in particular to the maritime support segment. Serco employs some 6,000 people in North America, of whom 2,300 work in defence, and has been providing services to the US Navy for nearly 30 years, so we know this market well. NSBU, which employs around 1,000 people, brings world-class ship and submarine design, systems, and engineering services, production support and in-service sustainment capabilities, which are highly complementary to Serco’s existing skills in ship modernisation, hardware integration and naval logistics. The combined business will be a top tier supplier of services to the US Navy, which has recently announced plans to increase the fleet from 280 to 355 ships by 2034, and we see a long-term and growing demand for the capabilities that the combination of Serco and NSBU will be able to provide.
“We are financing the Acquisition through a mix of debt and equity which will allow us to maintain leverage well within our target range of 1-2x EBITDA, and we expect the Acquisition to be materially accretive to earnings in the first full year of ownership.
“We greatly look forward to welcoming our new colleagues to Serco. The current management team of NSBU will continue to run the business and lead the integration into Serco, and we know they are as excited as we are by the opportunity to create a major new supplier of maritime engineering services, combining our joint capabilities in ship and systems design, modification and sustainment.”
NSBU is to be acquired for $225 million on a cash-free, debt-free basis, and subject to customary working capital and other relevant adjustments up to the date of completion. The acquisition is expected to close in the second half of 2019 and is subject to regulatory approvals, including customary Hart-Scott-Rodino (HSR) and Committee on Foreign Investments into the United States (CFIUS).
The acquisition of NSBU will broaden the capabilities and increase the scale of Serco’s North American and international Defence businesses; increase exposure to US Navy fleet expansion, which is one of the fastest-growing areas of public procurement; enable Serco to generate synergies through sharing fixed overheads across a wider revenue base in North America and increase underlying earnings per share (EPS) by 7-9% above current analyst consensus for 2020.