Exclusive: CACI in the lead to buy Lockheed's IT business - sources

Fri Dec 18, 2015 12:33am EST
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By Mike Stone and Andrea Shalal

(Reuters) - Defense contractor CACI International Inc (CACI.N: Quote) has emerged as the top contender for Lockheed Martin Corp's (LMT.N: Quote) government information technology (IT) business, as the interest of rival bidders fades, people familiar with the matter said.

Leidos Holdings Inc (LDOS.N: Quote) and Engility Holdings Inc (EGL.N: Quote), which were also considering offers, feel discouraged by the prospects of the assets for sale following meetings with Lockheed, the people said this week.

Annual revenues for the government IT business are now between $4.5 billion and $5 billion, instead of the $6 billion initially projected, the people said. CACI, however, remains interested in a potential deal, the people added.

To be sure, Lockheed may decide to spin off the government IT business rather than sell it outright, the people said.

The strategic review of the business, which could fetch more than $4 billion in a sale, was initially slated to conclude by the end of the year, but is now expected to finish in the first quarter of 2016.

The sources asked not to be identified because the negotiations are confidential. Lockheed, Leidos and Engility declined to comment, while CACI did not respond to a request for comment.

A deal with CACI would create the largest government services contractor in the United States at a time of lower government spending, increased competition and delays in new contracts.

Lockheed, the Pentagon's largest supplier, is looking to pay down debt following its agreement in July to acquire Sikorsky Aircraft, the helicopter unit of United Technologies Corp (UTX.N: Quote), for $9 billion in cash.   Continued...

A Lockheed Martin F-35 Lightning II fighter jet is seen in its hanger at Patuxent River Naval Air Station in Maryland October 28, 2015.     REUTERS/Gary Cameron