Leidos to buy Dynetics for $1.65 billion
WASHINGTON — Defense contractor Leidos said Dec. 17 that it is acquiring Dynetics for $1.65 billion as it seeks growth opportunities in hypersonics, space solutions, autonomy and advanced sensors.
Dynetics will become a wholly owned subsidiary of Reston, Virginia-based Leidos, and will bolster the company’s presence in Huntsville, Alabama, where Dynetics is headquartered, Leidos said.
In a Dec. 17 call with investors, Leidos executives said Dynetics should add roughly $1 billion in annual revenue in 2020 without upsetting Leidos’ low rate of capital expenditures.
“With Dynetics we are adding innovative capabilities in high growth areas, creating opportunities to grow in complementary and attractive segments, including hypersonics, space and weapons solutions,” Roger Krone, Leidos chairman and chief executive, said.
Leidos expects the purchase to close in the first quarter of 2020.
Space solutions and hypersonics comprise about 25% of Dynetics’ revenue. Dynetics spokeswoman Kristina Hendrix said that Dynetics, as a private company, does not disclose its annual revenue.
Dynetics is building the Universal Stage Adapter for NASA’s Space Launch System, and provides structural qualification testing for United Launch Alliance’s Vulcan rocket. Dynetics is also supplying the propulsion system for Astrobotics’ Peregrine lunar lander, and is supporting Maxar Technologies in building the Power and Propulsion Element of NASA’s Lunar Gateway space station.
“Our two complementary organizations strategies and cultures will broaden each companies’ customer reach and together we will enhance our offering and services across a broader combined customer base,” Krone said.
Jim Reagan, Leidos chief financial officer, said space programs are an area where Dynetics offers the most synergies with Leidos.
“The engineering and high-end technology opportunities that we see there are really going to spring from the technological capabilities that Dynetics brings to us,” he said.
Leidos is designing space sensors to track hypersonic weapons, provides engineering and mission support for NASA cargo runs to the International Space Station, and is building a hosted payload for the U.S. Federal Aviation Administration to sharpen GPS signals for pilots.
Krone said Leidos hopes all 2,300 employees at Dynetics will stay through the acquisition, which would boost Leidos’ headcount to around 36,300 people. He said the companies have similar corporate cultures, which should ease the integration process despite the difference in size.
Reagan said Leidos expects to borrow $1 billion to $1.1 billion to finance the acquisition. The company will also use cash on hand and cash flow between now and closing the purchase to buy Dynetics, he said.
Leidos said the board of directors at both companies unanimously approved the purchase.