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CACI: defence contractor gets defensive

Buying C-Cubed

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CACI International, the IT services company that chiefly serves the US federal government, is to acquire C-Cubed, a provider of specialized defence and intelligence services. CACI's move looks to be largely defensive, as two of its rivals in the sector have recently been acquired.

CACI, which has not released details of the price it will pay for Springfield, Virginia-based C-Cubed, expects the purchase to close during October 2003. C-Cubed employs 400 staff, most of whom have high-level
security clearance. It provides technology for network enterprise solutions, systems integration, integrated logistics support, combat systems, and deep submergence engineering. The company made $49 million in revenue for the year ending June 20, 2003, with operating income of $3.2 million.

The transaction is anticipated to be accretive to CACI's financial performance for the fiscal year ending June 30, 2004. C-Cubed's clients include the Defense Advanced Research Projects Agency, Inland Revenue Service, and the Space and Naval Warfare Systems Center, Charleston.

The acquisition can be seen as a defensive move by CACI, which exists in the rapidly consolidating US government IT services sector. Two of CACI's rivals have been acquired by top-tier defense contractors in recent months.

Lockheed Martin earlier this month agreed to buy Titan for $2.4 billion, after paying $658 million for a "substantial portion" of the government sector business of Affiliated Computer Services, which gave it an additional 5,800 employees.

In June, General Dynamics signed a deal to buy Veridian for $1.5 billion in cash and assumed debt, adding $2 billion in additional revenue to the company's IT and network systems business with clients including US Air Force, the State of Texas, the US Navy, the US Army, and the US Coast Guard.

Prior to this in December, Computer Sciences Corp snapped up DynCorp for $1 billion.

Consolidation is driven by IT services providers scaling up to compete for a slew of major long-term government contracts, originating mainly from the new Department of Homeland Security, which is now the single largest US federal agency with a budget of $37.7 billion to invest in IT systems and infrastructure. The sector is also experiencing major investment from the General Services Administration Millenia project, which has a budget of $25 billion to invest in federal government IT services projects over an indefinite time period.

Source: ComputerWire/Datamonitor

Related research:

Datamonitor, "Technology spending plans in the UK Public Sector"

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