Aerospace and defense company L-3 Communications Holdings Inc. LLL announced that it has signed a definitive agreement to sell its National Security Solutions (“NSS”) business to CACI International Inc. CACI for $550 million in cash.
The decision to let go this division did not come as a surprise as year-to-date sales (till Sep 25, 2015) from this business was down 19% year over year to $768 million. The decline in revenue was primarily due to a reduction in U.S. defense spending, which lowered sales for Intelligence Solutions related to technical support services for a U.S. government agency.
During the third quarter 2015 release, the company lowered the future sales outlook for the NSS business due to delays on various DoD ID/IQ contract vehicles.
L-3 Communications is presently undergoing a transformation process to sharpen its focus on core operations. The decision to sell the NSS business will enable the company to concentrate on other businesses which will support top-line growth and help in margin expansion.
The net proceeds from the sale of this business will help the company to continue with its transformational activities and will be used for investment in avenues that will drive shareholders’ value in the long term. The sale of NSS is expected to be completed in the first quarter of 2016, subject to customary closing conditions and necessary regulatory approvals.
L-3 Communications currently has a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the aerospace and defense space are The Boeing Company BA and General Dynamics GD. Both companies carry a Zacks Rank #2 (Buy).
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