Stepping aside from a bidding war, CACI International [CACI] on Tuesday withdrew its $10.4 billion unsolicited offer to acquire CSRA, Inc. [CSRA], leaving General Dynamics [GD] alone to close its previously agreed transaction to purchase CSRA.
CACI didn’t specify why it decided against further pursuit of CSRA, which spurned the offer, but Ken Asbury, the company’s CEO, said it won’t spend unreasonably on acquisitions.
“The potential for such a high value and transformational transaction certainly warranted our pursuit of this unique opportunity,” Asbury said in a statement on Wednesday. “We will continue our aggressive pursuit of strategic opportunities, judiciously and without engaging in auctions at uneconomic levels.”
After GD amended its original offer for CSRA to $41.25 per share, 50 cents per share higher than its initial agreement, CRSA’s board said it preferred GD’s bid. The all-cash offer by GD was considered less risky than CACI’s $44 per share bid, which only included $15 per share in cash and the remainder in stock.
Asbury maintained that a CACI and CSRA combination “would have created an industry leading pure play in the federal IT solutions and services market. We also believe the combined entity would have provided shareholders with the potential for significant stock appreciation.”
In a filing with the Securities and Exchange Commission (SEC) on Wednesday, GD said it expects the acquisition of CSRA to close in early April. Originally, the companies said the deal would close by June 30. The pending transaction has already received regulatory approvals.
In the Wednesday filing, GD said it is combining with CSRA because the federal IT services market is consolidating and because customers in this space are putting together larger contracts, “placing a premium on the requirement for increased scale and mass.”
On Tuesday, in a separate filing with the SEC, GD said that it has offered employment to a number of senior CSRA executives once the acquisition closes. The verbal offers were made to George Batsakis, chief growth officer, Christian Marrone, chief of staff, Kenneth Deutsch, senior vice president of the Defense Division, Paul Nedzbala, senior vice president of the Federal Civilian Division, and Leigh Palmer, senior vice president of the National Security Division.
Once GD completes its acquisition of CSRA, it plans to create a new business segment called GDIT, which will have $9.9 billion in annual sales, making it the second largest provider of federal IT services behind Leidos [LDOS], which had $10.2 billion in sales last year.