We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Lockheed (LMT) Merges IT Business with Leidos Subsidiary
Read MoreHide Full Article
Lockheed Martin Corp. (LMT - Free Report) has completed the spin-off of its Information Systems & Global Solutions (“IS&GS”) business segment and combined it with a Leidos Holdings, Inc. (LDOS - Free Report) subsidiary. The spin-off was announced this January using a tax-efficient Reverse Morris Trust transaction.
With the latest spin-off, Lockheed has finished the portfolio reshaping initiative undertaken in 2015 and in the process, made Leidos the largest IT provider in the federal market.
The Consideration
The transaction is valued at $4.6 billion. It includes a cash payment of $1.8 billion to Lockheed and Leidos stock worth $2.8 billion to shareholders.
The $1.8 billion special cash payment will be utilized for repaying debt, paying dividends, and/or repurchasing its stock. Shareholders of Lockheed received roughly 50.5% of Leidos shares (approximately 77 million shares of common stock).
Lockheed had repurchased 9.4 million shares through the Reverse Morris Trust. According to analysts at Stifel Nicolaus, the spin-off will give a lower-than-anticipated boost to its bottom line as the company repurchased a lower number of shares than investor expectations of 10 million.
The statement led to a decline in the defense giant’s stock price to a six-month low. Yesterday, Lockheed’s shares fell 3.6% to close at $256.77. Moreover, the company was the seventh worst performer on the S&P 500 Index yesterday.
Lockheed’s Take on the Merger
According to Marillyn Hewson, Chairman, President and CEO of Lockheed, the merger will strengthen the company’s position in the core aerospace and defense markets, and deliver higher value to its shareholders. It will also allow the company to focus on its business growth strategy and better align technological investments.
The company expects its portfolio to grow at a faster rate and ensure higher returns following the divestiture to Leidos. The new portfolio should have a somewhat lower exposure to short-cycle businesses that are affected by budget volatility.
Lockheed announced its plan to sell the IS&GS business. Simultaneously, the company announced its decision to acquire Sikorsky. This reflects Lockheed’s focus on its core defense manufacturing business.
Zacks Rank & Key Picks
Lockheed Martin currently has a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the aerospace and defense space are Engility Holdings, Inc. and General Dynamics Corporation (GD - Free Report) . While Engility Holdings sports a Zacks Rank #1 (Strong Buy), General Dynamics carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Lockheed (LMT) Merges IT Business with Leidos Subsidiary
Lockheed Martin Corp. (LMT - Free Report) has completed the spin-off of its Information Systems & Global Solutions (“IS&GS”) business segment and combined it with a Leidos Holdings, Inc. (LDOS - Free Report) subsidiary. The spin-off was announced this January using a tax-efficient Reverse Morris Trust transaction.
With the latest spin-off, Lockheed has finished the portfolio reshaping initiative undertaken in 2015 and in the process, made Leidos the largest IT provider in the federal market.
The Consideration
The transaction is valued at $4.6 billion. It includes a cash payment of $1.8 billion to Lockheed and Leidos stock worth $2.8 billion to shareholders.
The $1.8 billion special cash payment will be utilized for repaying debt, paying dividends, and/or repurchasing its stock. Shareholders of Lockheed received roughly 50.5% of Leidos shares (approximately 77 million shares of common stock).
LOCKHEED MARTIN Price
LOCKHEED MARTIN Price | LOCKHEED MARTIN Quote
Why Lockheed Shares Tumbled
Lockheed had repurchased 9.4 million shares through the Reverse Morris Trust. According to analysts at Stifel Nicolaus, the spin-off will give a lower-than-anticipated boost to its bottom line as the company repurchased a lower number of shares than investor expectations of 10 million.
The statement led to a decline in the defense giant’s stock price to a six-month low. Yesterday, Lockheed’s shares fell 3.6% to close at $256.77. Moreover, the company was the seventh worst performer on the S&P 500 Index yesterday.
Lockheed’s Take on the Merger
According to Marillyn Hewson, Chairman, President and CEO of Lockheed, the merger will strengthen the company’s position in the core aerospace and defense markets, and deliver higher value to its shareholders. It will also allow the company to focus on its business growth strategy and better align technological investments.
The company expects its portfolio to grow at a faster rate and ensure higher returns following the divestiture to Leidos. The new portfolio should have a somewhat lower exposure to short-cycle businesses that are affected by budget volatility.
Lockheed announced its plan to sell the IS&GS business. Simultaneously, the company announced its decision to acquire Sikorsky. This reflects Lockheed’s focus on its core defense manufacturing business.
Zacks Rank & Key Picks
Lockheed Martin currently has a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the aerospace and defense space are Engility Holdings, Inc. and General Dynamics Corporation (GD - Free Report) . While Engility Holdings sports a Zacks Rank #1 (Strong Buy), General Dynamics carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>