(Bloomberg) -- Northrop Grumman Corp. agreed to sell a technology-services business to Veritas Capital for $3.4 billion as part of the contractor's effort to sharpen its focus on defense-related products.
The cash deal is expected to close in the first half of 2021, Northrop and Veritas said Monday. The business, with information-technology offerings that include cybersecurity and engineering services, is expected to generate sales of about $2.3 billion this year.
The transaction highlights Northrop's “focus on growing core businesses where technology and innovation are the key differentiators” Chief Executive Officer Kathy Warden said in a statement. The Falls Church, Virginia-based company, a large defense contractor to the U.S. government, supplies products including satellites, naval weapons systems and military drones. Northrop Grumman plans to use the proceeds for share buybacks and to repay debt.
For Veritas, the acquisition will bolster its footprint in the government technology market. After the deal closes, the New York-based private equity firm expects to combine the operation with Peraton, one of its portfolio companies, which serves federal agencies and commercial entities.
“The federal IT and mission support services business of Northrop Grumman has an exceptional track record of delivering innovative technology that addresses the critical needs of its government agency customers,” Ramzi Musallam, CEO and managing partner of Veritas, said in a separate statement.
Northrop had been considering a sale as part of a strategic review of the unit that was underway as recently as late October, Bloomberg News reported at the time. The shares were little changed at $301.06 after the close of regular trading in New York.
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