Lockheed Martin [LMT] on Monday said the exchange offer is underway for the separation of its Information Systems & Global Solutions (IS&GS) segment, one more step in concluding the merger of the business with Leidos [LDOS].
Under plans for the exchange offer, Lockheed Martin stockholders have the opportunity to exchange their shares of the company’s common stock for shares of Abacus Innovations Corporation, which is a subsidiary of Lockheed Martin created to facilitate the transaction. Once the merger with Leidos is complete, Abacus stock will convert into shares of Leidos.
Leidos and Lockheed Martin in January announced the $5 billion acquisition of most of IS&GS by Leidos. The transaction is structured as a Reverse Morris Trust, which allows Lockheed Martin to avoid paying taxes on any gains associated with divesting IS&GS. Once the deal closes, pre-merger Abacus stockholders will own a 50.5 percent share of Leidos.
In March the waiting period for the federal government’s antitrust review of the acquisition expired, clearing one hurdle to the deal. The exchange offer is scheduled to expire the morning of Aug. 16.
Leidos’ stockholders will meet on Aug. 8 to vote on the merger.
Terms of the exchange offer provide Lockheed Martin shareholders who tender their shares to receive a 10 percent discount in value to the equivalent amount of Leidos common stock.