Computer Sciences Corp. (CSC) announced today that it has acquired Nichols Research Corp., an IT services vendor that focuses on federal government contracts.
The deal, a stock-for-stock transaction, is valued at nearly $400 million. Nichols, which has about 3,000 employees in 30 U.S. locations, reported revenue of $455 million for the 12 months ended May 31. About 80% of the company's revenue comes from federal contracts.
Under the terms of the merger, Nichols stockholders will receive more than 6 million shares of CSC at an exchange ratio of 0.423, which had a value of $391 million based on CSC's closing price Sept. 17. The exchange ratio is subject to adjustment based on the average closing price of CSC stock during a specified period before the consummation of the transaction. CSC will assume all of Nichols' outstanding stock options at the same exchange rate, while the merger is expected to be tax-free for Nichols stockholders.
Nichols provides defense technology services for the Redstone Arsenal in Huntsville, Ala., home to several major U.S. Army installations. Nichols has more than 1,600 professional staff in the Huntsville area, and CSC already employs more than 2,300 IT professionals in the region, supporting government and commercial customers. CEO Van B. Honeycutt said in a prepared statement that he expects Redstone to be one of the first Army organizations to outsource its IT infrastructure. Said Honeycutt: "The combination of CSC and Nichols will place us in a strong position to capture this work."