Seeking to expand its services portfolio, shipbuilder Huntington Ingalls Industries [HII] on Wednesday said it has agreed to acquire government services provider Camber Corp. for $355 million in cash and plans to establish a new $1 billion business segment around its services companies.

The deal is expected to close later this year, subject to regulatory approvals, and has been approved by HII’s board of directors. The enterprise value of the deal is $380 million, including $25 million in tax benefits.

Huntington Ingalls President and CEO Mike Petters. Photo: HII
Huntington Ingalls President and CEO Mike Petters. Photo: HII

Alabama-based Camber has $364 million in annual sales and is a provider of mission-based services and IT solutions. The company’s core capabilities are in agile software engineering and IT, modeling, simulation and training, intelligence analysis and operations, engineering and management, capabilities around unmanned aircraft and unmanned submersible systems, and comprehensive chemical, biological, radiological, nuclear and explosive, and anti-terrorism and force protection services.

HII said that Camber will enable it to grow its services business with the Navy and with new government customers.

“This acquisition is consistent with our Path to 2020 strategy to optimize and expand our services portfolio while continuing to invest in our shipbuilding business and returning substantially all free cash flow to shareholders,” Mike Petters, HII’s president and CEO, said in a statement. “Camber has an impressive and complementary array of people, capabilities and relationships that make it a great fit for us, and we are excited to welcome Camber’s 1,700 employees to the HII family.”

HII said it will combine Camber with its existing services businesses to create a new segment, HII Technical Solutions, which will be led by Andy Green, who will report to Petters. Green is currently corporate vice president of Corporate Development with responsibility for business development related to marine technical services and shipbuilding.

The new segment will consist of Camber, AMSEC, Continental Maritime of San Diego, Newport News Industrial, SN3, Undersea Solutions Group, and UniversalPegasus International, running a gamut of service work from ship repair to energy services.

HII said that Technical Solutions will have low single-digit revenue growth and operating margin in the low single digits initially, expanding to between 5 percent to 7 percent by 2020. HII also said that the new segment will have a little more than 25 percent of its business in commercial markets, primarily nuclear, and oil and gas.

HII said that the acquisition will be accretive to earnings and cash flow in the first full year. Camber has adjusted operating margin of 6.9 percent and a backlog of about $800 million. HII reports its third quarter financial results today.

Well Fargo is Camber’s financial adviser on the deal.

Separately, on Wednesday, HII said it is increasing its quarterly dividend by 20 percent to 60 cents per share.