Unisys Corporation has closed the sale of the company's U.S. Federal business to Science Applications International Corporation (SAIC), the company announced on Monday. Net proceeds have been expected to be used to pay down debt and reduce pension obligations and improve Unisys' balance sheet and cash flow profile.
"The transaction ushers in a more agile Unisys," said Unisys Chairman and CEO Peter Altabef. "The improved capital structure that comes from the sale of U.S. Federal positions Unisys with improved operational flexibility to better serve our clients and provides the potential for delivering increased value to shareholders."
Unisys announced that it has issued a notice of redemption to redeem $440 million in aggregate principal amount of its outstanding 10.750 percent Senior Secured Notes due 2022. Pro forma for the transaction, the company's net leverage (inclusive of pension deficit) has been reduced from 4.3x 2019 Adj. EBITDA(1) pre-transaction to 2.4x on a pro forma basis.
The company's results reflect revenue and charges that the company believes are not indicative of its ongoing operations and that can make its revenue, profitability and liquidity results difficult to compare to prior periods, anticipated future periods, or to its competitors' results.
These items consist of certain portions of revenue, post-retirement, debt exchange and cost-reduction and other expenses. Unisys has noted that each of these items can distort the visibility of trends associated with the company's ongoing performance.
Earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted EBITDA has excluded certain revenue and related profit relating to reimbursements from Unisys’ check-processing JV partners for restructuring expenses included as part of the company's restructuring program, post-retirement, debt exchange, and cost-reduction and other expenses, non-cash share-based expense. and other (income) expense adjustments.
The acquisition was announced in Feb. 2020. SAIC acquired for $1.2B in cash, SAIC announced on Thursday. The transaction multiple of approximately 13x LTM 9/30/19 Adjusted EBITDA(5) will add greater value to SAIC and will provide a significant premium to Unisys’ trading multiple.
“This exciting opportunity advances our strategy by building on our modernization capabilities, increasing customer access, accelerating growth and enhancing shareholder value…The financial benefits of acquiring Unisys Federal are compelling, including accretion of adjusted EBITDA margins, non-GAAP earnings per share, and cash generation,” said Nazzic Keene, CEO of SAIC and 2020 Wash100 Award recipient.
Unisys is a global information technology company that builds high-performance, security-centric solutions for the most demanding businesses and governments. Unisys offerings include security software and services; digital transformation and workplace services; industry applications and services; and innovative software operating environments for high-intensity enterprise computing.