Science Applications International Corp. announced its first acquisition since it was spun off from its namesake parent company, purchasing Reston-based Scitor for $790 million.
Executives said the purchase was driven by SAIC’s strategy to expand into the intelligence and Air Force markets. More than 90 percent of Scitor’s 1,500 employees hold high-level security clearances with the government, SAIC said.
“We’ve been assessing the intelligence market since last year and identified Scitor as our best opportunity,” Anthony Moraco, SAIC’s chief executive, said in a call with investors Monday.
The purchase of Scitor, which has a reputation as a high-end intelligence-services provider, will give McLean-based SAIC access to classified contracts with the National Reconnaissance Office, the Air Force and a range of intelligence agencies, the company said. It also broadens the company’s list of government customers, Moraco said.
“We believe that in today’s environment of federal fiscal pressures, diversification and increased customer access is strategically important for long-term growth,” he said.
The old SAIC spun off its services arm and rebranded itself Leidos to focus on different markets in 2013, and analysts said at the time Leidos walked away with more-promising business units.
But since the split, SAIC and Leidos have gone down different paths. After a rocky start, SAIC has reported higher sales and profits while Leidos has struggled to win over Wall Street.
SAIC is using the momentum of its success to get back into the intelligence community in an aggressive way, said Robert Kipps, managing director of KippsDeSanto, a McLean aerospace-defense investment bank.
The SAIC-Scitor deal also marks another consolidation in the Washington services market, which is vulnerable to fluctuations in government spending. The number of such mergers increased in 2014, and analysts say the trend will continue in 2015, with federal spending remaining tight and companies seeking to better position themselves to compete for work.
Chantilly-based Engility completed its $1.3 billion acquisition of TASC last week. Executives cited similar reasons behind the purchase, including reducing dependency on a single government customer and expansion into the growing intelligence market.
SAIC’s sales were flat at $1 billion in the last quarter compared with the previous year, and profit rose to $37 million.
Scitor recorded sales worth $600 million last year and is owned by Los Angeles private equity firm Leonard Green & Partners. Scitor’s chief executive James Hoskins and chief financial officer Bob Kosinski will retire, but company President Timothy Dills will stay on as leader of the intelligence division at SAIC, the company said.
Scitor was founded in 1979, and the company’s name is derived from the Latin word meaning ‘to seek’ or ‘to know,’ according to its Web site.
The deal is expected to close in May.