WASHINGTON \u2014 Northrop Grumman has struck a $3.4 billion deal to sell its federal IT and mission support business to Veritas Capital.<\/p>\n\n\n\n
The agreement, announced Dec. 7, is expected to close by June 2021. At that point, Veritas plans to incorporate the Northrop business units with Peraton, a Veritas subsidiary that supports government customers and specializes in technology products for the space, defense and intelligence markets.<\/p>\n\n\n\n
Northrop is expected to generate $2.3 billion in revenue, which will be funneled into share repurchases and debt retirement, the company said in a news release.<\/p>\n\n\n\n
\u201cThis divesture allows us to drive value and reflects our strategy of focus on growing core businesses where technology and innovation are the key differentiators,\u201d said Kathy Warden, Northrop\u2019s CEO and president. \u201cWe expect to create compelling value to our shareholders through this transaction and execution of our capital allocation strategy.\u201d<\/p>\n\n\n\n
Reports of the sale first surfaced in October.<\/p>\n\n\n\n
Byron Callan, an analyst with Capital Alpha Partners, said that the sale shows there is still isn\u2019t consensus within the defense industry on how to organize IT and services businesses alongside more traditional hardware business units for products like aircraft, vehicles or other weapons.<\/p>\n\n\n\n
Callan pointed to Lockheed Martin\u2019s sale of its information and global services business to Leidos in 2016; L-3\u2032s sale of its IT solutions division to CACI in 2015; and Harris\u2019 sale of its IT business to Veritas in 2017, which later became Peraton. However, other major companies have acquired government IT companies, such as General Dynamics\u2019s purchase of CSRA in 2018.<\/p>\n\n\n\n
\u201cWe have believed that as DoD spending flattens in the 2020s, primes could seek to jettison \u2018non-core\u2019 businesses that will still be profitable, but face declining sales or more intense competition,\u201d Callan wrote in an email to investors.<\/p>\n","protected":false},"excerpt":{"rendered":"
The sale is expected to close in the first half of 2021.<\/p>\n","protected":false},"author":7,"featured_media":29078,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_yoast_wpseo_meta-robots-noindex":"","_yoast_wpseo_meta-robots-nofollow":"","_yoast_wpseo_canonical":"","_acf":"","_yoast_wpseo_primary_category":12,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","_smg_distribution_targets":{"9":{"categories":["industry","it-networks","daily-brief","newsletters","home"],"primary_category":"industry"}}},"categories":[160,12,36],"tags":[],"coauthors":[3384],"class_list":["post-15402","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-daily-news-roundup","category-industry","category-newsletters"],"acf":{"subheadline":"","legacy_arc_id":"RVALTUK3YFDNNA7RBVUW2AJTVY","arc_canonical_url":"\/industry\/2020\/12\/08\/northrop-sells-it-business-to-veritas-capital-for-34b\/","remove_feature_photo":false,"is_sponsored":false,"subtype":"","redirect_url":"","disable_inline_ads":false,"native_logo_pretext":"Presented By:"},"yoast_head":"\n