CACI’s $2.6B Arka buy targets space dominance, agentic AI

CACI International is making its largest-ever acquisition in the agreement to buy Arka Group, which aims at opening up more opportunities in the space and intelligence market.

All parties expect to close the move in March, when CACI will add around 1,100 people with deep roots in classified space programs. The $2.6 billion price represents 21% of CACI’s market capitalization, which was $12 billion before markets opened Monday.

But the strategic significance for CACI is greater than the financial metrics.

The Arka purchase expands CACI's technology portfolio into areas such as space-based sensors, geo-intelligence, agentic artificial intelligence, laser warning systems, and directed energy components. Each of those areas complement work CACI is already doing.

“Arka represents a deliberate step in executing our market strategy for space and adds complementary technology and increased customer presence,” CACI CEO John Mengucci told investors in a conference call Monday. “That technology and presence will allow the combined company to capture significant future opportunities in an important and growing market and strengthen our leadership in this burgeoning domain.”

Companies like Arka are a rare find, according to Mengucci.

“There are only a few companies able to provide the most advanced imaging technology,” he said in describing Arka’s position in space-based sensors.

CACI already has a presence in land, air and sea sensors. Both companies also have experience in processing and analyzing sensor data.

“Together we become a leading provider of multisource intelligence,” he said.

Arka also brings to CACI a set of artificial intelligence capabilities such as agentic AI offerings, which automate intelligence production and mission management functions.  

“There is a tremendous opportunity to scale that software across CACI’s portfolio,” Mengucci said. “This is exactly the kind of innovation and investment that customer’s need, and Arka makes that possible almost immediately.”

Private equity firm Blackstone acquired Arka in 2019, but the company's roots trace back over 60 years. Arka’s facility in Danbury, Connecticut built parts of the optical systems for the Hubble Space Telescope.

Blackstone started adding to Arka in 2020 via the acquisitions of Amergint, Tethers Unlimited, and Danbury Mission Tech. In 2023, Arka purchased Stratagem Group and Lumacron. In 2024, the radar and sensing business from Maxar became part of Arka.

Arka's capabilities, particularly the Danbury facilities where it builds electro-optical and infrared sensors for satellites, give CACI more of a foundation for opportunities related to the Golden Dome missile defense initiative and missions for the U.S. Indo-Pacific Command.

"Their technology is deployed on satellites across all orbits and is the tip of the spear for a wide range of critical national security space initiatives," Mengucci said.

Arka expects to generate about $650 million in revenue over the next 12 months and $150 million in EBITDA (earnings before interest, taxes, depreciation and amortization), according to CACI's investor presentation.

Arka also touts an EBITDA margin as in the low-20% range and a double-digit growth rate. That is driven by the ramping-up of some large programs it is a part of, CACI’s chief financial officer Jeff MacLauchlan said on the call.

Firm-fixed price contracts represent 80% of Arka's revenue mix, a fact that aligns well with the Pentagon’s evolving buying preference for outcomes over labor hours.

McLauchlan said how Arka does its backlog needs to be looked at differently because of the nature of its work. The under-contract backlog is $600 million, but the pipeline of $2 billion in non-competitive revenue covers work supporting satellite and space programs.

“These are named programs that are related to proliferated systems. They are budgeted. They are long-horizon franchise positions, and you don’t change them in the middle of the program,” McLauchlan said. “You have to think about it a little differently than the way we generally talk about backlog.”

In other words: Once Arka's sensors are designed into a satellite constellation, the company maintains that position for the life of the program. That can stretch out over multiple years and across multiple satellite constellations.

The acquisition of Arka is part of CACI’s long-term strategy to build its space business:

• The 2024 acquisition of Azure Summit Technology for $1.2 billion
• SA Photonics in 2021
• LGS Innovations and Mastodon in 2019
• Six3 Systems in 2013.

Wells Fargo acted as exclusive financial adviser for CACI and provided committed financing for the transaction. Gibson Dunn acted as legal adviser for CACI. J.P. Morgan Securities LLC and Evercore acted as financial advisers for Arka. Simpson Thacher & Bartlett LLP acted as legal adviser for Arka.