Cobham plc completes acquisition of
Sparta, Inc.
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Cobham plc (LSE: COB.L) completed its
acquisition of Sparta, Inc., an
employee-owned U.S. company which is SEC
registered, but unquoted.
Lake Forest, Calif. based Sparta performs a
wide range of scientific,
engineering and technical assistance
services, both as a prime contractor
and subcontractor, primarily for the U.S.
military services, other agencies
of the U.S. Dept. of Defense (DoD), and the
intelligence community.
Sparta analyzes complex technological,
strategic and tactical issues
necessary to define the requirements for new
tactical and strategic weapons
and defense systems, including systems for
Ballistic Missile Defense (BMD);
develops engineering solutions to accommodate
conflicting technological,
schedule, and budgetary requirements; and
assists in the design,
integration, evaluation and testing of
software and hardware components.
These activities include the development of
sophisticated computer
simulations, applications software, and
functional algorithms depicting
aspects of various weapons and defense
systems and their operation, and the
design, fabrication, and testing of prototype
hardware.
Sparta's technology development activities
include research and development for laser
systems; distributed interactive computer
simulations; software development; battle
management/command, control, and
communications; artificial intelligence;
information security; aircraft avionics; test
range data acquisition; advanced materials
and production technology; and composite
materials. Sparta also manufactures composite
parts for aircraft, missile systems and
automobiles.
Cobham CEO Allan Cook stated:
"[Sparta] is one of the leading companies in
areas of critical importance in the provision
of US National Security. The
strong incumbent management will provide
Cobham with an exciting platform
for growth in the Systems Engineering and
Technical Assistance segment,
which is complementary to our existing US
intelligence and defense
capabilities. This is a major step forward in
the implementation of Cobham's
technology strategy and the creation of a
significant Tier 2 business
supplying the US DoD and intelligence markets."
Sparta brings a unique and distinct set of
Systems Engineering and Technical
Assistance (SETA) capabilities to Cobham,
which immediately gains a leading
position in a new business segment and the
opportunity to leverage
capabilities and customer relationships for
its existing technologies.
Within Intelligence, Sparta provides a full
range of products and services
including the planning and direction,
collection, processing, analysis and
production of information for the U.S.
intelligence community. In addition,
Sparta provides other intelligence-related
services including tools for
network and information security and develops
protection systems using
models and simulations
Within Missile Defense, Sparta provides
technical solutions and capabilities
including systems engineering, modeling and
simulation, test and
evaluation, operations and sustainment
planning and battle management,
primarily to the US Missile Defense Agency.
It has had an important role for
almost thirty years in the development and
deployment of effective U.S.
ballistic missile defense systems. Sparta
also provides training, testing
and evaluation services for U.S. tactical
systems, including supportability
analysis and training for Unmanned Aircraft
Systems programs.
Sparta has leveraged its core capabilities
into a number of other markets,
including engineering and development of
network centric warfare systems,
modeling and simulation of space systems and
engineering services to a
variety of U.S. government customers. The
military composites business is
well positioned and increases Cobham's ship
set value on the F-22 Raptor and
F-35 Lightening II.
Merrill Lynch acted as exclusive financial
advisor to Sparta in connection
with this transaction. Gibson, Dunn &
Crutcher, LLP acted as SPARTA's
outside legal counsel.
Terms
On June 4, 2008 Cobham announced it had
completed its acquisition of Sparta.
The cash consideration for Sparta was up to
$416 million on a debt and cash
free basis, of which $381 million will be
payable on completion and
satisfied from Cobham's existing cash and
debt facilities, with the balance
of up to $35 million to be paid over the next
three years to holders of
unvested options who remain with the company.
Plans for the acquisition were first
announced on Jan. 16, 2008. The
acquisition, which was subject to regulatory
and Sparta shareholder
approvals, closed as expected during the
second quarter of 2008.
For the year ended December 30, 2006, Sparta
generated operating profits of
$28.6 million and EBITDA of $34.3 million on
revenue of $297.3 million. On
September 30, 2007, gross assets were
approximately $122.0 million. The
total cash consideration represents a
multiple of approximately 12.1X 2006
EBITDA. It is expected that the acquisition
will be earnings-enhancing in
2008.
Sparta, which is run from Washington D.C.,
will, after a short period of
assimilation and subject to appropriate
approvals, become a separate
strategic business unit within an expanded
North America Cobham Division.
During this assimilation phase, Sparta will
report to Andy Stevens, Cobham
Chief Operating Officer, in accordance with
the applicable U.S. Government
industrial security regulations.
Sparta's business is primarily focused on
classified work. Accordingly,
subject to U.S. Government approval, Sparta
will operate under an SSA
(Special Security Agreement) in conjunction
with Cobham's existing
classified programs. It is intended that
three senior Outside Directors will
be appointed to the Board of the SSA. All the
outside directors provide
assurance on security matters and strategic
guidance on defense and market
trends.
Sparta employs approximately 1,200 people
based across 20 U.S. sites, with
principal locations in and around Washington
D.C., in Huntsville, Alabama,
Southern California and Colorado Springs. A
substantial proportion of
Sparta's workforce has U.S. security
clearances. Sparta's management team
will continue to run and grow the strategic
business unit after completion
of the acquisition.
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