Private Equity News & Analysis

KKR, GA seal $1.65bn Northrop Grumman carve-out

CPPIB's credit arm, as well as KKR Capital Markets and four others, will provide financing for the purchase of government engineering consultancy TASC.

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Kohlberg Kravis Roberts and General Atlantic have agreed to pay $1.65 billion for TASC, a division of publicly traded defense contractor Northrop Grumman.

A statement released Sunday ended weeks of speculation over the deal, which arose out of Northrop Grumman's need to avoid falling foul of new US government regulations on defense industry conflicts of interest.

“As a fully independent entity, TASC will expand its ability to solve the US government’s most pressing technical challenges,” Wood Parker, TASC’s general manager and prospective chief executive, said in a statement. “Our singular focus, as always, will remain supporting the vital missions of our customers.”

TASC provides systems engineering and technical assistance (SETA) to intelligence, defense and civil agencies.

Our investment today is not only about capital.

Adam Clammer

General Atlantic advisor David Langstaff noted TASC is “at the forefront of protecting the nation from today's most serious security risks”.

KKR executive Adam Clammer echoed the sentiment, noting the investment is “not only about capital; it is an investment in the people, the mission and the future of TASC”.

Specific financial details about the transaction, expected to close in the fourth quarter, were not disclosed.

“The debt level is conservative and the cash balance is strong,” a General Atlantic spokeswoman told PEO, declining further comment. KKR declined to comment.

Anonymous sources in a Bloomberg report on Friday said the deal comprised about $1 billion in debt, while a Sunday report in the Wall Street Journal, also citing people familiar with the matter, put the figure closer to $800 million.

Senior debt for the TASC deal will be provided by Barclays, Deutsche Bank, Royal Bank of Canada and CPPIB Credit Investments, the lending arm of the Canada Pension Plan Investment Board, according to the statement. Mezzanine debt will be arranged by Highbridge Mezzanine Partners and KKR Capital Markets.

Founded in 1966, TASC has nearly 5,000 employees. The division generates about $1.6 billion in revenue.

Last year The Carlyle Group purchased a similar division from Booz Allen Hamilton in a $2.5 billion deal, while in 2007, Leonard Green bought Scitor Corp, another SETA sector defense consultant, for an undisclosed price.