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Orbital Sciences Corporation announced today that it has entered into a definitive agreement with Alliant Techsystems Inc. which will combine Orbital and ATK’s Aerospace and Defense (A&D) Groups to create a $4.5 billion (combined calendar year 2013 annual revenue), 13,000-person space, defense and aviation systems developer and manufacturer. The new company, to be called Orbital ATK, Inc., will serve U.S. and international customers with leading positions in the markets for space launch vehicles and propulsion systems, tactical missiles and defense electronics, satellites and space systems, armament systems and ammunition, and commercial and military aircraft structures and related components. As part of the transaction, ATK will spin off its Sporting Group, which focuses on commercial sporting equipment, to its shareholders.
Orbital’s closing stock price yesterday was valued at $5.0 billion for the tax-free stock-for-stock merger-of-equals transaction, combining Orbital’s small-and-medium-class satellite and launch vehicle product lines with ATK A&D’s rocket propulsion, military armament and precision weapons and commercial and military aircraft programs by leveraging Orbital’s systems design, engineering and integration capabilities to provide greater value-added to current and future customers.
Orbital’s President and Chief Executive Officer, David W. Thompson, will be President and Chief Executive Officer of the new company; President of ATK’s Aerospace Group, Blake E. Larson, will serve as Chief Operating Officer; and Orbital’s Chief Financial Officer, Garrett E. Pierce, will hold the same position in the new company.
Mr. Thompson said, “This merger-of-equals combination of Orbital and ATK Aerospace and Defense brings together two of the space and defense industry’s most innovative developers and cost-efficient manufacturers who have worked closely together for over 25 years. By building on Complementary technologies, products and know-how and highly-compatible cultures, the new Orbital ATK will deliver even more affordable space, defense and aviation systems to our existing customers and be strongly positioned to expand into adjacent areas.”
Mr. DeYoung, ATK’s Chief Executive Officer, said “The proposed merger will generate cost and revenue synergies and create a more streamlined and competitive operator, we see opportunities to build on ATK’s success in Aerospace and Defense through a combination with Orbital’s proven track record in creating new launch vehicles, satellites and other advanced space technologies. We are both focused on enhancing the capability of existing customer systems by developing solutions that can be more flexibly deployed to support their mission with enhanced cost-effectiveness. We also see significant opportunities for growth as new programs are initiated or begin to ramp up production.”
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The employment at Orbital ATK will be about 13,000 people, 4,300 scientist and engineers and 7,400 operations and production specialists in many of the laboratories, manufacturing and test and launch sites in 17 states. The new company will have a combined annual revenue of about $4.5 billion, EBITDA over $575 million and total contract backlog more than $11 billion. Net debt of Orbital ATK at closing could be about $1.4 billion, after taking into account combined cash balances of approximately $300 million. Annual revenue and cost synergies of $220-300 million are expected by 2016, consisting of $150-200 million of incremental annual revenue and $70-100 million of annual cost reductions.
The merger, ATK shareholder will own 53.8 percent of the equity of the combined company and shareholders with Orbital will own 46.2 percent. Both Boards have approved the combination is to be effected in a tax-free “Morris Trust” transaction structure, with a spin-off of ATK’s Sporting Group to it’s shareholders immediately prior to the merger. The transaction will close by the end of 2014. Orbital and ATK executives will conduct a conference call with financial analysts and investors Wednesday morning. Citigroup represented Orbital as financial advisor and Hogan Lovells US LLP represented Orbital as legal advisor.
Image credit: breakingdefense.com
