Arlington-based CACI International said Tuesday that it will buy L-3’s national security services business for $550 million in what would be a major consolidation among two large defense contractors.
The division, known as National Security Solutions, provides services to the Pentagon, intelligence agencies and other federal government departments. It is projected to add $1 billion in revenue for CACI, bringing its total to about $4.4 billion a year.
NSS has 4,000 employees around the world, 90 percent of whom have security clearances.
In a call with investors, CACI executives said the acquisition would strengthen the company’s ability to move more aggressively in pursuing federal contracts for intelligence analysis, big data, cybersecurity and training.
“The NSS acquisition strongly reinforces our strategic growth plan,” Ken Asbury, CACI president and chief executive, said in a statement. “I am confident the complementary, high-end solutions gained will strengthen our competitive position.”
The acquisition is subject to regulatory approval and slated to close during the quarter ending in March.
Recently, Frank Kendall, undersecretary of defense for acquisitions, technology and logistics, raised concerns about too much consolidation in the defense industry. As defense spending tightens, he said, he is worried about a lack of competition, particularly among the large prime contractors, which could lead to higher costs for the government.
But Byron Callan, a defense analyst, said in a note to investors that he expects “no major regulatory hurdles to this deal.”
The announcement comes as some major defense contractors, including Lockheed Martin, have said they are considering shedding their services businesses and focusing on major weapons programs such as airplanes and ships.
CACI sees a growth market in government IT services, particularly in defense and intelligence. And Asbury said acquiring NSS would help it “to pursue larger, higher-value solution and service programs.”
L-3’s NSS has a long track record in that market, executives said, including a contract to supply classified and unclassified network services to about 30,000 deployed service members.
CACI announced last month that it has a partnership with the Federal Aviation Administration to work on a system that could track and overtake drones flying too close to airports.
It also has grown by providing the background checks used in granting security clearances.
“We expect NSS’s deep subject-matter expertise and proven technologies to provide significant advantages in pursuing and priming larger opportunities, with a strong focus on delivering excellence, quality, and value to our customers,” John Mengucci, CACI chief operating officer and president of U.S. operations, said in a statement.