Valiant Will Pay £135 Million
Cubic Corporation announced on 19 April that it has entered into a definitive agreement to sell its Cubic Global Defense (CGD) Services business to Valiant Integrated Services for $135 million cash at close on a debt-free, cash-free basis, plus $3 million of contingent consideration tied to certain contract wins expected over the next 12-24 months. The transaction is anticipated to be completed within 30 to 60 days, subject to customary closing conditions and regulatory approvals.
CGD Services is a non-Original Equipment Manufacturer (OEM) providing training, operations, intelligence, maintenance, technical and other support services to the US government, its agencies and allied nations. CGD Services had revenues of $378 million in FY2017 and has some 3,500 employees working in 10 countries. The employees serve with customers in training and operational environments to help prepare and support forces through the provision of comprehensive training, exercises, staff augmentation, education, operational, intelligence, technical and logistical assistance to meet the full scope of their assigned missions.
As of 31 March 2018 the assets and liabilities of CGD Services will be considered held for sale and will be held at the lower of their carrying value or their fair value less estimated cost to sell. In Cubic’s fiscal second quarter results, the CGD Services business will be reflected as discontinued operations and the previous period financial results will be reclassified for comparative purposes. Cubic expects to record a non-cash charge of approximately $7 million within discontinued operations in the second quarter, based on the estimated excess of the carrying value of CGD Services over the consideration to be received. Upon the close of sale, the non-cash charge will be adjusted based upon a final analysis of the carrying amount of the assets and liabilities at the date of the sale, including the assessment of deferred tax assets and liabilities of discontinued operations.
“Cubic is focused on maximising long-term value for our shareholders by delivering superior value to our customers,” commented Cubic Corporation’s Chairman, President and CEO, Bradley H. Feldmann. “We regularly evaluate our portfolio to ensure we are devoting our resources to strategic markets where domain expertise, innovation and technical competency enable us to build market-leading positions with strong growth potential and higher margins. The sale proceeds will provide us with increased financial flexibility to pursue profitable growth opportunities in those markets.”
“We also believe current market dynamics are driving consolidation in the defence services industry, and the scale required to compete has increased meaningfully. This transaction will allow our Services business and its employees to be part of a more appropriately focused platform that will be better positioned to grow,” he concluded.