Lockheed Martin working with Leidos in reverse Morris Trust transaction

Lockheed Martin (LMT) has entered into a definitive agreement to separate and combine its realigned Information Systems and Global Solutions (IS and GS) business segment with Leidos Holdings, Inc. (LDOS) in a tax-efficient Reverse Morris Trust transaction, unlocking USD5 billion in estimated enterprise value for Lockheed Martin stockholders, the company said.

The agreement aligns IS and GS´s business with an industry leader in government IT and technical services, creating an enterprise capable of providing unparalleled solutions in industries from national security to health and life sciences.

The complementary portfolios of both companies will enable synergies, creating additional value for stockholders. I

Subject to regulatory approvals, the USD5 billion transaction includes a USD1.8 billion one-time special cash payment to Lockheed Martin, which the corporation intends to use to repay debt, pay dividends, and/or repurchase its stock.

The transaction is also subject to Leidos shareholder approval and completion of customary conditions, including receipt of opinions of tax counsel.

The transaction is expected to close in the third or fourth quarter of 2016.

Headquartered in Bethesda, Maryland, Lockheed Martin is a global security and aerospace company that — with the addition of Sikorsky — employs approximately 126,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.