In a deal that would significantly expand its capabilities in providing healthcare-related information technology (IT) solutions to the federal government, General Dynamics [GD] yesterday said it has agreed to acquire Vangent Holding Corp. from the private equity firm Veritas Capital for $960 million in cash.
GD said the deal would elevate it to Tier 1 status as a federal healthcare IT provider, basically meaning it will be able to compete for the largest opportunities in this market.
“Vangent is a well regarded, fast growing company that will add significant depth and breadth to General Dynamics’ healthcare IT organization, creating a Tier 1-level healthcare IT business unit with the scope and scale to compete in markets that are receiving high priority in current funding and entitlement reform initiatives,” Jay Johnson, chairman and CEO of GD, said in a statement.
GD said the acquisition would be accretive to its earnings in 2012.
Vangent has core expertise in business process improvements, such as designing, implementing and operating services for agency customers. For example, for the Department of Health and Human Services the company operates the beneficiary contact center that supports 47 million Medicare beneficiaries.
For the Department of Education, Vangent designed and operates the systems that used to enable student loan applications.
GD’s IT business sector, which does business in the federal healthcare market, specializes in IT infrastructure. Combined with Vangent, GD IT will be able to offer the federal market a broader range of capabilities from front end processing to infrastructure design and installation, not only for the healthcare space but for other federal market sectors as well.
The deal is expected to close by Oct. 1 subject to regulatory approvals. In 2010, Vangent had $761.8 million in sales and $40 million in net income.
Vangent’s largest customer is HHS, which makes up about 50 percent of revenues, followed by the Department of Education, which accounts for about 15 percent of business. The Defense Department is also a customer.
Vangent developed the DoD Medical Healthcare System that is responsible for patient record management. Other customers include the Departments of Labor and State.
Vangent also provides informatics solutions, which entails capturing data and analyzing it to find trends and enable process improvements.
Vangent, which has 7,500 employees and is based in Northern Virginia, used Bank of America/Merrill Lynch and Goldman Sachs as its financial advisers on the deal.