CACI Taking a Break From Deals
February 04 2016 - 3:30PM
Dow Jones News
CACI International Inc. plans to focus on integrating its latest
acquisition, but the federal information technology specialist's
chief executive said Thursday that it is open to more deals in a
year or so.
The company this week completed the $550 million purchase of an
intelligence-focused services business from L-3 Communications
Holdings Inc., the latest in a series of deals in the sector as
contractors seek to build scale and extra capabilities in what has
become a cutthroat business as a result of federal agencies
toughening their procurement rules.
"As of this week, we're sort of a digester," said CACI CEO Ken
Asbury in an interview after the company reported forecast-beating
quarterly earnings alongside a return to organic growth for the
year and a bullish 2016 financial outlook.
CACI's shares rose almost 20% at one point during Thursday's
session, erasing a year-to-date decline that has afflicted most of
the defense contractor community.
"The best thing we can do as a business is to figure out how to
grow organically," said Mr. Asbury, a former Lockheed Martin Corp.
executive who has led the company since 2013 and established it as
one of the prime consolidators in the federal IT business.
CACI's 2013 purchase of intelligence specialist Six3 Systems for
$820 million kicked off a string of deal making in the segment that
accelerated last year as larger contractors including Lockheed
looked to unload lower-margin services business, while smaller
players looked for scale.
Leidos Inc. last week agreed to buy the Lockheed services
business in a complex deal that will double annual sales to $10
billion, while Computer Sciences Corp. last year combined its
government unit with SRA International to form CSRA Inc.
CACI's purchase of the L-3 business will boost its own annual
sales to $4.4 billion and is expected to be accretive in the first
year.
"They were us, trapped in a product company," Mr. Asbury said of
the new acquisition.
The deal boosts CACI's leverage to around four times operating
earnings, and though Mr. Asbury said the company was prepared to go
a little higher, it would assess over the next 12 to 18 months what
could be added to the portfolio while feeling no pressure to match
Leidos in scale.
"We think investors have been nervous that CACI's results would
point to broader issues in the industry," said Rob Stallard at RBC
Capital. He said investors should be relieved by the rise in
revenue and order bookings in what is traditionally a seasonally
weak quarter for news business.
CACI's profit rose to $33.3 million from $24.6 million in its
fiscal second quarter, with per-share earnings rising to $1.23 from
$1.01.
The company's shares were recently up 13.8% at $91.85.
Write to Doug Cameron at doug.cameron@wsj.com
(END) Dow Jones Newswires
February 04, 2016 16:15 ET (21:15 GMT)
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