Northrop agrees to sell TASC unit for $1.65B
Northrop Grumman (NYSE:NOC) said Sunday it agreed to sell its advisory services business TASC Inc. to private equity firm General Atlantic LLC and affiliates of Kohlberg Kravis Roberts & Co. for $1.65 billion in cash.
The deal is the latest in a spate of buyouts, as the financing markets improve. On Thursday, the biggest leveraged buyout of the year was signed, when private equity firm TPG and the Canada Pension Plan struck a $4 billion deal to buy IMS Health Inc. (NYSE:RX).
Northrop put TASC up for sale to address concerns among lawmakers that some defense contractors were both advising government agencies on weapons systems and bidding for contracts to build them. The purchase gives the buyers an opportunity to benefit from U.S. defense spending, which will reach $680 billion in budget year 2010.
Northrop bought TASC in 2001, as part of its $5 billion acquisition of Litton Industries Inc. TASC, which was founded in 1966 by engineers from the Massachusetts Institute of Technology, has nearly 5,000 employees.
The debt package also reflects a more conservative lending environment. Roughly 50% of the purchase price for TASC will come from the buyers’ equity. Some large boom-era deals had as little as 10% to 20% equity contributed to a deal.
