CSRA Inc. [CSRA] on Wednesday said it has completed its acquisition of NES Associates, giving it new capabilities to enable it to compete for larger information technology (IT) modernization projects in the federal sector.
The small acquisition is the first for the company since Nov. 2015 when it was formed from the divestiture of former Computer Sciences Corp.’s federal sector unit and the acquisition of the former SRA International. Compute Sciences Corp. is now DXC Technology [DXC] following the combination of CSC and the Enterprise Services business of Hewlett Packard Enterprise [HPE].
“NES Associates will bring us innovative network engineering capabilities as we pursue large IT modernization opportunities in upcoming years, another example of how we live our tagline, ‘Think Next. Now,'” Larry Prior, CSRA’s president and CEO, said in a statement.
Prior first announced the deal in May during the company’s fourth quarter earnings call. He said then that NES is a small company with “very specific expertise in defense telecom, infrastructure and applications architecture as well as implementation services.” He also said the NES has “hands-on expertise” with most military base networks inside and outside the United States, that that “this experience can directly translate to other security-sensitive customers, such as Homeland Security as well as the intelligence community.”
The acquisition is expected to be slightly accretive to CSRA’s fiscal year 2018 results and holds potential to drive organic sales growth, prior said. CSRA paid $105 million for NES, The price was disclosed in its FY ’17 annual report filed with the Securities and Exchange Commission in May.
NES is based in Northern Virginia.
Since the creation of CSRA in late 2015, the company has focused its capital allocation primarily on debt repayments and to a lesser degree shareholder returns. Prior said in May that over the next few years the debt will come down “slowly” as the company “gradually” transitions to a more balanced deployment of its free cash flow.
CSRA posted $5 billion in sales in its fiscal year 2017 that ended on March 31 with net income of $304 million, $1.84 earnings per share (EPS). The company currently expects sales in FY ’18 to between $5 billion and $5.2 billion and adjusted per share earnings between $1.88 and $2.00.