SAIC to split into two companies

SAIC says that freeing the two businesses from concerns about organizational conflicts of interest will unlock new growth opportunities.

Science Applications International Corp. will split into two separate, publicly traded companies, probably before the end of 2013.

The decision to split into an technical services and IT business and a science and technology solutions business is primarily driven by the impact of increased concerns with organizational conflicts of interest, said SAIC Chairman and CEO John Jumper, in a statement released Thursday.

With OCI taken off the table, both businesses will have access to markets they cannot currently enter, Jumper said.

The technical services and IT business has about $4 billion in annual revenue, while the larger science and technology solutions business will have about $7 billion in annual revenue, SAIC said in a statement.

On the 2012 Washington Technology Top 100, SAIC is ranked as the sixth largest prime contractor in the federal IT and systems integration market.

SAIC is not the first to make such a move in reaction to organizational conflicts of interest. In recent years, Northrop Grumman sold off its TASC technical and advisory services business, and Lockheed Martin sold a similar business. In July, L-3 Communications completed the spinoff of its technical services business, creating a new company called Engility.

The decision to split SAIC comes after the company completed a strategic review under Jumper, who became CEO in March and then chairman in June. The plan is to structure the split as a tax-free spin-off with SAIC stockholders getting 100 percent of the shares in the new company, which will be comprised of the technical services and IT business.

The name, management and structure of the new company has yet to be determined.

According to an SAIC investor presentation, the technical services and IT business will have four target markets:

  • Government enterprise IT services
  • Testing and service life extension
  • Logistics and supply chain management
  • Systems engineering and technical assistance

With the OCI concerns removed the new company should see growth opportunities in SETA work, cost and financial analysis, and program office support, SAIC said. The company also will target opportunities around cloud computing, mobility, X-as a service and big data management, analytics and visualization, according to SAIC.

The science and technology business, which will keep the SAIC name, will focus on national security, engineering and health. Growth opportunities for SAIC will come from cybersecurity, big data analytics and intelligence, surveillance and reconnaissance systems.

Some of the specific national security opportunities SAIC will be able to pursue because OCI is no longer a factor are Navy airborne programs, battlespace awareness, maritime domain awareness, electronic warfare and missile warning, the company said in its statement.

In the health arena, SAIC will continue to target electronic health records, clinical information systems and advanced clinical analytics.

The engineering portion of the business will pursue more commercial opportunities such as oil and gas services, natural resources program management, and power transmission and smart grids.

SAIC also will continue to be an aggressive acquirer of other companies. The spinoff likely will have a limited focus on mergers and acquisitions, according to the investor presentation.

Both companies will be traded on the New York Stock Exchange.