Lockheed Martin Delays Decision on Spinoff

A transaction is not likely to take place this year, despite previous reports.
Katie Kuehner-HebertDecember 3, 2015

Lockheed Martin will hold off deciding whether to sell or spin off its government services businesses and units in its missiles and fire-control division, Chief Financial Officer Bruce Tanner told a conference hosted by Credit Suisse, according to Reuters.

While the company had seen “very high interest” in the services and information technology units, this type of sale “tends to take a little longer to handle that level of detail that is expected with more people involved in the process,” Tanner said.

Reuters reported in October that Lockheed was exploring merging some of the businesses, with a value of about $4 billion, with another government services contractor.

4 Powerful Communication Strategies for Your Next Board Meeting

4 Powerful Communication Strategies for Your Next Board Meeting

This whitepaper outlines four powerful strategies to amplify board meeting conversations during a time of economic volatility. 

“Both Leidos Holdings and CACI International Inc. have discussed a so-called Reverse Morris Trust deal for the assets, a transaction that would avert a hefty tax bill, according to sources familiar with the matter,” Reuters wrote.

The units, which have more than 17,000 employees, have been struggling due to reduced government spending, increased competition, and delays in new contracts. Tanner told the conference he would have preferred to keep the $6 billion business, parts of which offer “an incredibly high return on invested capital” and have great cash flows, but the business was not growing.

He said the decision to sell or spin off the businesses was pretty firm unless there was a dramatic and rapid change in the government marketplace. “I can’t say never … but it would be hard for me to imagine that we’d deviate from this path.”

Lockheed Martin has forecast a slight slowdown in sales this year from the $45.6 billion in revenue it recorded in 2014.