CSRA, Inc. [CSRA] on Tuesday said its board of directors prefers a proposal by General Dynamics [GD] to acquire the company over an unsolicited, but higher, offer made by CACI International [CACI] over the weekend.
General Dynamics and CSRA on Tuesday amended their February merger agreement, with GD now agreeing to up its acquisition price by 50 cents per share to $41.25 per share. The higher price per share ups the value of the pending transaction by $100 million to $9.7 billion, still all cash.
CACI over the weekend said it wants to buy CSRA for $44 per share, with $15 per share in cash and the rest in the company’s stock. The total value of CACI’s offer is $10.4 billion.
A spokeswoman for CACI on Tuesday told Defense Daily that CACI is reviewing the amended agreement between GD and CSRA.
GD, also over the weekend, had said it was sticking with its original purchase price, saying then it represented a better value due to being all cash and because potential fluctuations in CACI’s stock price creates uncertainty in the ultimate value for CSRA shareholders if CACI’s offer prevails. GD also questioned the cost saving synergies touted by CACI if it ties up with CSRA.
In a joint press release Tuesday morning, GD and CSRA said that in deciding in favor of GD’s amended offer, CSRA’s board “took into account various factors, including among others, the value, certainty of value, certainty of closing and speed of closing of the General Dynamics offer, as amended, compared to the CACI proposal.”
Later Tuesday afternoon, CSRA posted a new filing with the Securities and Exchange Commission outlining the discussions between the various parties. CSRA says in the filing that basically all of the execution risks associated with the GD acquisition have been eliminated and that withdrawing from the deal in favor of CACI’s proposal would introduce new risks, including issues around changes to CACI’s stock price, that company’s need to obtain shareholder approvals, and the timing to close the transaction.
GD expects the acquisition to close by June 30. The deal has already achieved regulatory milestones. CACI said that it could close an acquisition by July 31.
CSRA has about $2.8 billion in debt that would be assumed by either GD or CACI as part of their acquisition terms.
GD’s tender offer to purchase all outstanding shares of CSRA common stock began on March 5 and is set to expire on April 2 unless extended.