BAE keeps grinding on services divests, sources say
BAE Systems (LON:BA) continues working to reach a potential deal to sell its services businesses, two sources familiar with the situation said.
The likelihood of a transaction being reached is higher than it has been over the last two to three months, said one of the sources. The same source said BAE’s commitment to divesting the businesses is “pretty high” even if an outright sale is not struck.
BAE has been working to sell its Systems Information Solutions and Technology Solutions Services units since earlier this year alongside financial advisors Stone Key Partners and Morgan Stanley. Prospective buyers were given the option to bid on the packages, known for the sake of the auction as “Red” or “Blue”, separately or whole.
Leidos (NYSE:LDOS) was reported by this news service to have emerged as the lead bidder for the combined BAE assets following final bids, collected the week of 6 July. It was further reported that the lead bidder was valuing the business at approximately USD 1.1bn.
One of the sources said Leidos remains in the mix for the businesses. Several people following the situation also said they heard the Reston, Virginia-based company was still working towards a transaction, albeit at a reduced valuation.
Following the July bids, several of the people said they heard Leidos' offer was several hundred million above private equity offers. This gap appears to have since been shrinking, perhaps creating less differentiation between the strategic’s offer relative to financial sponsor bids, one of the people said.
Financial sponsors have continued to hang around the hoop on a potential deal, said the first source, declining to identify the parties.
Veritas Capital and Madison Dearborn Partners, via its partnership with CoVant, were among the sponsors circling the assets, according to several of the people. It is unclear whether either is actively pursuing the businesses at this time.
The Carlyle Group, Kelso & Company and Veritas were reported by this news service to be among the sponsors vying for the combined BAE assets.
CoVant, co-founded by Joseph Kampf, was formed for the purpose of acquiring and growing companies in the federal technology solutions marketplace. In 2012 CoVant teamed up with MDP to pursue such acquisitions. Prior to CoVant, Kampf served as chief of Anteon International which sold to General Dynamics (NYSE:GD) in 2006 for USD 2.2bn.
BAE Systems and Leidos declined to comment. Veritas and Madison Dearborn did not return calls for comment.