Public sector powerhouse CACI International has submitted a $7.2 billion bid to acquire rival solution provider CSRA – a move that could thwart U.S. defense contractor General Dynamics' planned purchase of CSRA for $6.8 billion.
CSRA, No. 14 on the 2017 CRN Solution Provider 500, acknowledged receiving an "unsolicited" proposal from CACI to buy all of its outstanding common stock in exchange for a mixture of cash and equity. The offer is worth $44 per share, including cash equivalent to $15 per share and a 0.184 CSRA-CACI equity trade ratio, and would give CSRA stockholders 55 percent ownership of the combined company.
The offer General Dynamics made last month is an all-cash deal worth $40.75 per share and includes a $2.8 billion CSRA debt assumption, giving it a total value of $9.6 billion. However, that proposal will expire at 11:59 p.m. ET on April 2.
CSRA said its board of directors "will carefully review and consider" the CACI overture. Falls Church, Va.-based CSRA remains subject to the initial agreement with General Dynamics, which would be owed $204 million if CSRA chooses to pursue a deal with CACI, No. 16 on the CRN Solution Provider 500.
General Dynamics has a $66 billion market cap, compared to CACI's market valuation of $3.88 billion.
The nearly $10 billion total valuation of the General Dynamics-CSRA deal would have made it the third-largest tech merger or acquisition to take place in 2017.
General Dynamics plans to proceed with its tender offer to acquire CSRA and said the transaction would close shortly after the offer expires on April 3. The defense contractor claims that CACI’s bid “overstates the real value to the CSRA shareholders and understates the risk attendant to it,” arguing that 65 percent of CACI’s $44 per share offer depends upon an all-time high share price of the solution provider’s “volatile” common stock.
General Dynamics further maintains that the CACI proposal would both saddle the combined government solution provider with debt of $6.8 billion and thrust a “significant” opportunity cost on CSRA shareholders if the transaction does not close until CACI’s estimated date of July 31, 2018.
General Dynamics provides business jet, submarine, combat vehicle, communication systems and other tactical assets to the U.S. government. The aerospace and defense company had been planning to make CSRA part of its information systems and technology division, which delivers IT solutions to the U.S. Department of Defense, intelligence outfits and federal civilian agencies.
Similarly, Arlington, Va.-based CACI supports "national security missions" and government IT operations in defense, intelligence and federal civilian agencies.