Lockheed Martin Corp. (NYSE: LMT) has announced an agreement to “separate and combine” its realigned information systems & global solutions (IS&GS) business unit with Reston, Virginia–based Leidos Holdings, Inc. (NYSE: LDOS), an engineering firm.
Lockheed Martin, in a Tuesday news release, described it as a “tax-efficient Reverse Morris Trust transaction, unlocking $5 billion in estimated enterprise value for Lockheed Martin stockholders.”
The Bethesda, Maryland–based defense contractor has plants in Salina and Owego that are part of its mission systems and training business unit, which is not part of this transaction.
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“This strategic transaction is an important milestone in the portfolio reshaping strategy we announced in July 2015 and allows us to focus on our core business in aerospace and defense,” Marillyn Hewson, president, chairman, and CEO of Lockheed Martin, contended.
Subject to regulatory approvals, the $5 billion transaction includes a $1.8 billion one-time special cash payment to Lockheed Martin, which the company intends to use to repay debt, pay dividends, and/or repurchase its stock, according to the release.
Earnings
Lockheed Martin announced the transaction on the same day it released its earnings report for the fourth quarter and all of 2015.
The defense contractor earned $933 million, or $3.01 per share, in the fourth quarter of 2015, up from the $904 million, or $2.82 per share, earned in the fourth quarter of 2014.
The company’s fourth-quarter earnings included a special charge for workforce reductions of $67 million, which decreased net earnings by $44 million, or 14 cents per share. Also, non-recoverable transaction costs of $45 million associated with the acquisition of Sikorsky Aircraft Corporation and the company’s strategic review of its government IT and technical-services businesses, decreased earnings by $28 million, or 9 cents a share.
Lockheed Martin generated sales of $12.9 billion in the fourth quarter, up from $12.5 billion in the same period in 2014.
For all of 2015, Lockheed Martin earned $3.6 billion, or $11.46 per share, compared to $3.6 billion, or $11.21 per share, in 2014.
The firm generated sales of $46.1 billion in 2015, up slightly from $45.6 billion in 2014.
Contact Reinhardt at ereinhardt@cnybj.com
