SAIC Inc. announces split into SAIC and Leidos to better target services
SAIC Inc.'s board of directors approved spin-off of its services business into Leidos Holdings in a stock and cash transaction, to be finalized Sept. 27. Leidos is to become a new system integration firm. SAIC is a two-time winner of the System Integrator of the Year Award and ranked 16 in the System Integrator Giants listing from Control Engineering.
SAIC Inc. is separating its system integration business into a new company, Leidos, in a stock and cash transaction of more than $295 million. SAIC is two-time winner of the Control Engineering System Integrator of the Year Award, and SAIC Energy, Environment & Infrastructure LLC ranked 16th on the Control Engineering System Integrator Giants 2013, a list of the 100 largest system integration firms that reported their system integration revenue to Control Engineering. According to the 2013 System Integrator of the Year article, SAIC has 21 ISO standard awards and certification in quality six sigma procedures and touts 80% repeat business.
In comments to CFE Media, SAIC said, “Leidos will focus on delivering science and technology solutions in three high-growth markets that reflect high priority, long-term global needs – national security, engineering, and health. As a key business area of the company, Leidos Engineering will deliver new perspectives with a collaborative, multifunctional team comprised of architects, engineers, scientists, business consultants, and technologists.”
Mike Gwyn, manager of the SAIC Facilities & DesignBuild Operation, said, “As we transition to Leidos, we continue forward with the same skills and expertise that earned us the 2013 System Integrator of the Year honor. We'll continue to bring the right blend of people, technology, and systems together to help our clients meet their objectives.”
In the Sept. 9 spin-off announcement, SAIC Inc. (NYSE: SAI) said its board of directors has approved the separation of its technical, engineering, and enterprise information technology services business and declared a pro rata dividend to its stockholders, effective after market close on Friday, Sept. 27, 2013 (the "distribution date"), of all of the shares of SAIC Gemini Inc., which will hold the spun-off business and be renamed Science Applications International Corporation (Science Applications) in connection with the completion of the separation.
Each SAIC Inc. (SAIC) stockholder of record as of the close of business on Sept. 19, 2013 (the "record date") will receive, effective as of the distribution date, one share of common stock of Science Applications for every seven shares of common stock of SAIC held as of the record date. The distribution of these shares will be made in book-entry form, which means that no physical share certificates will be issued.
On the distribution date, SAIC will change its name to Leidos Holdings Inc. On Monday, Sept. 30, 2013, shares of Leidos will begin "regular way" trading on the New York Stock Exchange under the ticker symbol LDOS and shares of Science Applications will begin "regular way" trading on the NYSE under the ticker symbol SAIC.
Shares and cash
The board of directors of SAIC also approved a one-for-four reverse stock split of Leidos shares, effective immediately after the distribution.
In connection with the spin-off, Science Applications will incur approximately $500 million of debt financing. The proceeds of the debt financing will be used to pay a $295 million cash dividend to SAIC immediately prior to the completion of the spin-off. SAIC intends to use the net proceeds it receives from this dividend for general corporate purposes.
"SAIC has a proud legacy of solving complex problems, thriving on innovation and working shoulder-to-shoulder with customers," said John Jumper, SAIC chairman and CEO and future chairman and CEO of Leidos in the company statement. "For the next chapter, we will take things to the next level – moving forward and launching two great American companies that will continue to serve the best interests of not only our customers and shareholders, but also our communities, our families, and our world."
"This strategic decision by our board culminates a year of hard work and continued performance by our dedicated employees," said the program executive for the separation, SAIC COO Stu Shea, future president and COO of Leidos. "As we move forward in Leidos, the talent of our team and the passion they have for serving our customers will be the foundation of our future success."
Future Science Applications CEO Tony Moraco said, "As a leading technology integrator, the new SAIC will be a more streamlined organization with greater focus on servicing our customers' critical mission and enterprise IT needs. The spin allows us to eliminate any perception of organizational conflicts of interest, enabling us to pursue a new world of market opportunities with an integrated enterprise approach."
Distribution of shares
The distribution does not require stockholder approval, and no action or payment is required by SAIC stockholders to receive shares of Science Applications common stock. Stockholders who hold SAIC common stock on the record date, and do not trade the right to receive Science Applications shares (see pre-spinoff trading below), will receive a book-entry account statement reflecting their ownership of Science Applications common stock or their brokerage account will be credited with the Science Applications shares.
Fractional shares of Science Applications common stock will not be distributed. Instead, fractional shares of Science Applications' common stock will be aggregated and sold in the open market, with the net cash proceeds distributed to those stockholders who would otherwise hold Science Applications fractional shares.
SAIC has received a private letter ruling from the Internal Revenue Service that the distribution of Science Applications shares generally will not be taxable to SAIC or stockholders of SAIC for U.S. federal income tax purposes. Cash received in lieu of fractional shares will, however, be taxable. Stockholders are urged to consult their tax advisors regarding the particular consequences of the distribution in their situation, including the applicability and effect of any U.S. federal, state, local and foreign tax laws.
Prior to the distribution date, SAIC will send an information statement to each stockholder of record as of the close of business on the record date. The information statement will describe the procedures by which the distribution will be effected and other details of the transaction. The information statement will be available on the Securities and Exchange Commission's website at www.sec.gov and on the SAIC website at www.saic.com.
The completion of the distribution is subject to the satisfaction or waiver of a number of conditions, including the effectiveness of the Registration Statement on Form 10 filed by SAIC Gemini, Inc. with the SEC and certain other conditions described in the information statement included in such Form 10 Registration Statement and in the agreements filed as exhibits to the Form 10 Registration Statement. The board of directors of SAIC expects all conditions to the distribution to be satisfied on or before the distribution date.
See more details of the transaction on the next page