Northrop Grumman said Sunday it agreed to sell its advisory services business TASC Inc. to private equity firm General Atlantic LLC and affiliates of Kohlberg Kravis Roberts & Co. for $1.65 billion in cash.
The No. 2 defense contractor says it will use the proceeds to fund a new $1.1 billion increase to its stock buyback program. At the end of the third quarter, the company had about $280 million remaining on its $2.5 billion share repurchase plan.
TASC, based in Chantilly, Va., serves intelligence, defense and civil agencies. It has about 5,000 employees and is expected to record 2009 revenue of $1.6 billion. It is part of Northrop's information systems sector.
Northrop doesn't expect the deal to affect its 2009 net income or earnings per share. The company also said that after the stock buybacks, the deal won't affect its 2010 earnings per share from continuing operations.
The transaction is expected to close by the end of the year.
Northrop has been repositioning itself to expand its electronics, information and intelligence businesses, those with products most in demand from the government.
Last month, the company reported higher-than-expected revenue growth. The company also lifted its 2009 outlook as it announced third-quarter earnings that beat analyst forecasts. Its net income fell about 4 percent to $490 million, or $1.53 per share, from $512 million, or $1.51 per share, a year earlier, reflecting the impact of pension expenses.