what happened
Shares of Perspectives (NYSE: PRSP) jumped more than 10% on Wednesday after the government’s IT company bought a deal worth more than $ 7.1 billion. The stock was already higher thanks to takeover rumors, with the takeover price a premium of almost 50% over the shares trading before the rumors in November.
Approximately
Perspecta, a provider of IT services for government clients, said before the markets opened on Wednesday, it had agreed to sell to private equity firm Veritas Capital. The terms of the transaction require Perspecta holders to receive $ 29.35 per share in cash for each holding.
Veritas already owns 14.5% of Perspecta, a company founded in June 2018 through a three-way merger involving two Veritas businesses. The private equity firm plans to merge Perspecta into Peraton, a separate stake of Veritas which is also in the business of Northrop Grumman.
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The deal follows a year of disappointment for Perspecta, which lost its most important contract in February 2020. The US Navy selected Leidos Holdings to modernize and maintain its computer networks, a contract that previously accounted for approximately 15% of Perspecta’s total revenue.
The loss of the naval contract was a reminder of the importance of scope and scope for defense contractors. Combined with Peraton and the Northrop Grumman assets, Perspecta will be part of a larger, more diversified company that can manage to lose any individual award.
Now what
The deal comes at a time when the usually sleepy state IT sector is in the spotlight thanks to Palantir Technologies, which became known at the end of September and the shares have risen by almost 270% in recent months. Palantir has jumped in part because investors are strong about the growth of government IT spending in the coming years, which should bode well for the entire sector.
As Perspecta containers have found out, this is an industry where size and scale matter. If the valuations are higher, I would consolidate further in the coming quarters ManTech International and CACI among the likely participants as buyers or sellers, as companies try to gain market share and compete better with newcomers such as Palantir and Peraton.