Canadian Manufacturing

General Dynamics buys government-focused IT firm CSRA for almost US$7B

The deal followed Trump's signature last week on a budget bill that added significantly to U.S. military spending


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The U.S. company builds a long list of military hardware, including the M1 “Abrams” tank. PHOTO: Richard Bumgardner/U.S.Army

FALLS CHURCH, Va.—The defence contractor General Dynamics will spend almost $7 billion to acquire CSRA with the Trump administration pushing defence spending aggressively higher.

Shares of CSRA Inc., an internet technology company, soared more than 31 per cent before the opening bell Feb. 12.

President Donald Trump signed a budget bill last week that provides $700 billion for the Pentagon, giving it $94 billion more this budget year to spend on troops, training, ships and other hardware. It’s the biggest year-over-year windfall since the budget soared by 26.6 per cent in 2003, when the nation was fighting in Afghanistan, invading Iraq and expanding national defence after the 9-11 attacks.

Next year, the figure is expected to jump to $716 billion.

General Dynamics said that it will pay $40.75 per CSRA share. That’s a 32 per cent premium to its Friday closing price of $30.82. The deal includes an additional $2.8 billion in debt.

Chairman and CEO Phebe Novakovic said in a printed statement that the acquisition will help General Dynamics provide cost-effective internet technology solutions to the Department of Defence, intelligence community and federal civilian agencies.

The defence sector has made huge gains over the past year under the new administration with a number of friction points rising globally.

The Standard & Poors 500’s index that traces aerospace and defence stocks has risen almost four times as fast as the S&P 500 over the past 12 months.

CSRA and General Dynamics Corp. are based in Falls Church, Virginia.

The transaction is expected to close in the first half of the year.


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