Lockheed Martin (NYSE: LMT) has completed the separation of its Information Systems & Global Solutions (IS&GS) business segment and merged it with a subsidiary of Leidos Holdings, Inc. (NYSE: LDOS). The transaction concludes Lockheed Martin's portfolio reshaping strategy announced last year and was finalized through a tax-efficient Reverse Morris Trust transaction.
The merger creates tangible value for both businesses. It will enable Lockheed Martin to reinforce its heritage in aerospace and defense and deliver more value to stockholders. As for the newly combined company, it will offer a broader and more affordable portfolio of capabilities and services to customers.
"This strategic transaction enhances our competitive posture in our core aerospace and defense markets and increases the value we deliver to our stockholders," said Lockheed Martin Chairman, President and CEOMarillyn Hewson. "As we position our company for the future, this action will enable us to focus our business growth strategy, align our technology investments and increase the value we deliver to customers worldwide."
The closing of the merger followed the expiration of the exchange offer and the satisfaction of certain other conditions. As part of the transaction, Lockheed Martin received a $1.8 billion special cash payment, which the Corporation will use to repay debt, pay dividends, and/or repurchase its stock. As a result of the exchange offer, Lockheed Martin reduced outstanding shares of its common stock by 9,369,694 shares, or approximately 3% of the outstanding common shares. Lockheed Martin stockholders who participated in the exchange offer received an approximately 50.5 percent stake in Leidos (approximately 77 million shares of Leidos common stock). The special cash payment, plus the shares of Leidos common stock to be received by participating Lockheed Martin stockholders (valued based on Leidos' August 15 closing price adjusted for the $13.64 per share Leidos special dividend to be paid), results in an aggregate transaction value of approximately $4.6 billion.
Preliminary Results of Exchange Offer
Lockheed Martin stockholders had an opportunity to exchange their shares of Lockheed Martin common stock for shares of Abacus Innovations Corporation (Abacus), a wholly owned subsidiary of Lockheed Martin created to facilitate the transaction, which automatically converted into the right to receive shares of Leidos common stock at the close of the transaction. The final exchange ratio for the exchange offer was set at 8.2136 shares of common stock of Abacus for each share of Lockheed Martin common stock. Each share of Abacus common stock was converted in the merger into one share of Leidos common stock. As a result, Lockheed Martin stockholders who tendered and did not properly withdraw their shares of Lockheed Martin common stock in the exchange offer received approximately 8.2136 shares of Leidos common stock (subject to the receipt of cash in lieu of fractional shares) for each share of Lockheed Martin common stock accepted for exchange.
Pursuant to the exchange offer, which expired today at 8:00 a.m. EDT, Lockheed Martin accepted 9,369,694 shares of Lockheed Martin common stock in exchange for the 76,958,918 shares of Abacus common stock owned by Lockheed Martin, which represent all of the outstanding shares of Abacus.
Because more than 9,369,694 shares of Lockheed Martin common stock were validly tendered and not properly withdrawn in the exchange offer, the exchange offer was oversubscribed and all shares of Abacus common stock owned by Lockheed Martin were distributed in the exchange offer. As a result of the oversubscription, it was not necessary to distribute shares of Abacus common stock to Lockheed Martin stockholders as a pro rata dividend. Earlier today, Lockheed Martin announced a preliminary proration factor of approximately 8.01 percent.
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About Lockheed Martin
Headquartered in Bethesda, Maryland, Lockheed Martin is a global security and aerospace company that employs approximately 98,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.
