US: Lockheed, Leidos merger creates $10B government services giant

Lockheed Martin will merge its IT and government services subsidiary with Leidos in a complex and tax-advantageous deal, creating the largest government services provider in the US with a $10 billion annual revenue base, the companies’ executives said Tuesday.

Bethesda, Maryland-based Lockheed’s government IT wing, with more than $5 billion in sales and 16,000 employees, is being sold to Reston, Virginia-based engineering giant Leidos for cash and stock. Leidos itself was spun off from Science Applications International Corp in 2013.

The deal, which is subject to regulatory approval, is expected to close in the third or fourth quarter of 2016.

“By bringing together our IT business with Leidos’ already strong customer base, we will create a competitor with the scale, portfolio and expertise to deliver unparalleled solutions and incredible value in a highly competitive contractor environment,” Lockheed Martin CEO Marillyn Hewson said in a investor call Tuesday.

On the call, other Lockheed and Leidos executives said they expect the company to pull in $10 billion in revenue, nearly double that of its closest contracting competitors, Booz Allen Hamilton and CSRA, Inc.

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