CSRA Inc (NYSE: CSRA) shares rose after the company agreed to be acquired by General Dynamics Corporation (NYSE: GD) for $40.75 per share in cash.
The transaction is valued at $9.6 billion, including the assumption of $2.8 billion in CSRA debt.
General Dynamics CEO Phebe Novakovic said, "The acquisition of CSRA represents a significant strategic step in expanding the capabilities and customer base of GDIT.
"CSRA's management team has created an outstanding provider of innovative, next-generation IT solutions with industry-leading margins. We see substantial opportunities to provide cost-effective IT solutions and services to the Department of Defense, the intelligence community and federal civilian agencies. The combination enables GDIT to grow revenue and profits at an accelerated rate. It will allow us to deliver even more innovative, leading-edge solutions to our customers."
CSRA CEO Larry Prior said, "Our combination with General Dynamics represents an excellent outcome for CSRA's stockholders, employees and customers. It builds on strong shared values, culture and a passion for serving our customers' missions. We believe that this combination creates a clear, differentiated leader in the Federal IT sector, with a full spectrum of enterprise IT capabilities, including unique depth in Next-Gen offerings in conjunction with our commercial IT alliance partners."
General Dynamics expects the transaction to be accretive to GAAP earnings per share and to free cash flow per share in 2019, and expects to generate estimated annual pre-tax cost savings of approximately 2% of the combined company's revenue by 2020.
Shares in CSRA hurtled $9.58, or 31.1%, to $40.40 in the final hour of trade on Monday. GD shares dropped two dollars to $210.10.