By Calvin Biesecker
Lockheed Martin [LMT] yesterday said it has agreed to sell its Enterprise Integration Group (EIG) business to the private equity firm Veritas Capital for $815 million in cash, giving up the unit to avoid new organizational conflict of interest (OCI) rules that the U.S. government is establishing to prevent companies from simultaneously advising on, and competing for, the same procurement.
The transaction is subject to regulatory approval and is expected to close this year. Veritas said that Pennsylvania-based EIG has 1,800 employees and generated $626 million in sales for the 12 months ended June 30.
EIG provides systems engineering and integration services and modeling, simulation, analysis and risk mitigation services to the U.S. intelligence community.
Lockheed Martin said it will update its financial guidance once the sale of EIG closes. The company reports its third quarter financial results on Oct. 19. EIG will be reported as part of the company’s discontinued operations at that time.
In June, Lockheed Martin announced its intention to sell the EIG unit as well as another business, Pacific Architects and Engineers (PAE), which it bought in 2006 but said no longer fits into the company’s strategy (Defense Daily, June 3). PAE remains for sale.
Combined, EIG and PAE account for about 3 percent of Lockheed Martin’s sales and less than 3 percent of its operating profits.
“We welcome EIG, the critical work it does, and its talented management team to the Veritas portfolio of companies, and we look forward to supporting management in accelerating growth and expanding EIG’s opportunities to service its important customers as an independent business, free from OCI constraints,” Robert McKeon, managing partner of Veritas, said in a statement. “EIG’s technical capabilities have distinguished it as the unparalleled leader in full life-cycle systems engineering and integration support to the U.S. intelligence community.”
Last year, Northrop Grumman [NOC] divested its government advisory services business in anticipation of the new OCI rules (Defense Daily, Nov. 10, 2009).