Engility To Buy TASC In $1.1 Bln Deal, Posts Higher Q3 Profit; Stock Up

(RTTNews) - Engility Holdings, Inc. (EGL), a pure-play government services contractor, and TASC, Inc. Tuesday said they have entered into a definitive agreement for Engility to acquire privately-held TASC in an all-stock transaction valued at about $1.1 billion, including the assumption of net debt.

Engility also reported impressive third-quarter results and boosted its earnings outlook for the year. The stock climbed over 4 percent in the extended trade.

TASC is a leading professional services provider to the national security and public safety markets. This transaction is expected to create a leading government services provider with expected combined pro-forma revenue of about $2.5 billion in 2014.

The transaction was approved by the Boards of Directors of both companies and is expected to close in the first quarter of 2015. It is expected to be significantly accretive to 2016 earnings per share, after adjusting for, among other things, amortization of acquired intangibles and cash taxes.

TASC has a substantial presence in the Intelligence Community, Space and other markets in which Engility is underrepresented. TASC, which is controlled by affiliates of Kohlberg Kravis Roberts & Co. L.P. and General Atlantic LLC has about 4,000 employees.

TASC's technical capabilities complement Engility's low-cost differentiation and will allow the combined company to deliver affordable high-quality services to its expanded customer base.

On a pro-forma basis, following the close of the transaction, the combined company is expected to generate approximately $2.5 billion in revenue and approximately $210 million in combined adjusted Earnings Before Interest, Tax, Depreciation and Amortization or EBITDA in 2014, excluding cost savings.

Meanwhile, Engility's net income for the third quarter grew to $13.2 million or $0.73 per share from $12.0 million or $0.68 per share for the year-ago quarter.

Excluding items, net income for the latest quarter was $0.86 per share, while it totaled $0.80 per share last year. On average, five analysts polled by Thomson Reuters expected earnings of $0.60 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue rose to $345.06 million from $339.30 million a year ago. Analysts expected revenues of $$352.71 million.

The company said it now expects earnings of $2.39 - $2.59 per share and adjusted earnings of $2.90 - $3.10 per share. Previously, the forecast was for earnings of $2.24 - $2.44 per share and adjusted earnings of $2.70 - $2.90 per share.

The company continues to expect full year 2014 revenue of $1.35 billion to $1.45 billion.

Analysts currently expect the company to earn $2.29 per share on revenue of $1.41 billion for the full year 2014.

The stock climbed 3.8 percent to settle at $37.62, and rose 4.2 percent in the extended trade.