Together, the two companies will be able to provide capabilities that span the full spectrum of the life-cycle of aerospace and defense programs from research and development, through test and evaluation, to operations, maintenance and field logistics.
“Expanding our government services capabilities and service offerings into more profitable and complementary market segments is a key part of KBR’s growth strategy,” KBR Inc. President and CEO Stuart Bradie said. “This strategic acquisition creates the equivalent of a global $2 billion government services organization with full service capabilities drawing on the best in class capabilities of both organizations.”
“Adding Wyle’s highly specialized and differentiated offerings to our global government services portfolio improves KBR’s overall risk profile by expanding into other government funding sources for higher-margin and largely cost-reimbursable work,” Bradie said. “This acquisition provides us with broader relationships with U.S. Government clients and grows our U.S. presence by acquiring a highly respected U.S.-focused franchise. The acquisition is expected to be accretive in the first year and provide longer term synergistic opportunities in markets where KBR’s large-scale logistics and project management capabilities combine with Wyle’s specialized technical capabilities.”
“The acquisition of Wyle looks to be a great opportunity for KBR to double down on the recently improved government services market with expanded, higher-end capabilities,” KippsDeSanto & Co. Managing Director Bob Kipps said. “Like other financial sponsors over the past year, Wyle’s owners leveraged the strong M&A market existing for sizeable targets to successfully exit a nearly 7-year old fund investment.”
Wyle will become a KBR business unit within KBR’s Government Services segment and will maintain much of its current structure to ensure business continuity. As of year-end 2015, Wyle’s funded backlog was $440 million with an additional $1.1 billion of orders not yet funded, but expected.
One hundred percent of Wyle’s business will be acquired through the acquisition of shares pursuant to a merger sub-transaction structure. The transaction price to KBR is $570 million, after adjustments for approximately $30 million of acquired tax benefits, and subject to other customary adjustments, including for net working capital, net cash and indebtedness of Wyle. The transaction is expected to be immediately accretive to KBR’s earnings per share and will initially be funded by utilizing KBR’s existing line of credit facility and approximately $200 million in cash.
The transaction has been unanimously approved by the KBR Board of Directors and is subject to certain regulatory approvals and customary closing conditions. The closing is expected to occur in the third quarter of 2016.