Provided exclusively by Mergermarket
L-3 Communications Holdings (NYSE:LLL) has collected initial bids from prospective buyers of its National Security Solutions (NSS) segment, said two sector advisors.
Ahead of tabling first round bids, one of the advisors said bidders met with management.
In July, L-3 tapped Deutsche Bank to explore alternatives for NSS, which provides enterprise and mission IT solutions, cyber operations support, intelligence operations support, integrated security and big data solutions to the US Government, according to a previous report by this news service.
Concurrent with its 2Q15 earnings release on 30 July, L-3 confirmed it was “engaged in a process to evaluate strategic alternatives” for NSS. According to the company, the alternatives could include a potential sale, spin-off or other divestiture transactions for the business. L-3 said it expects to conclude the review by year-end.
Speaking at the Jefferies 2015 Industrials Conference Wednesday, regarding NSS, CEO Michael Strianese said L-3 is “pretty engaged in that process,” adding that it will “certainly” conclude within the year.
Both sector advisors said NSS is being marketed with approximately USD 90m in EBITDA. Each cautioned that the figure has generous addbacks that they ballparked in the USD 20m range. The first advisor said it would be hard for buyers to pay a multiple off the full figure.
Private equity firms and strategics are expected to be showing interest in the business, both advisors said. However, the second advisor said he expects the bidder mix to tilt towards financial sponsors.
Prime contractor L-3 has four reportable segments: Electronic Systems, Aerospace Systems, Communication Systems and NSS. In 2014, NSS net sales of USD 1.2bn represented 10% of L-3’s total net sales.
For 1H15, NSS reported sales of USD 504m down 21% from 1Q14. Its margin for the same period was 4.2% down 160bps from 1H14.
In June, NSS announced it won a fixed-price, indefinite-delivery/indefinite-quantity Foreign Military Sales contract worth USD 95m. Under the contract, L-3 will provide air operation center training to Royal Saudi Air Force personnel for a five-year performance period.
New York City-based L-3 declined to comment.
by Richard Tekneci in New York and Claudia Montoto in Ft. Lauderdale
As seen in the mergermarket newsletter on 12/08/2015