Litton adds TASC to IT services portfolio

Litton Industries Inc. has announced plans to buy TASC from Primark Corp. a move that will boost Litton's Information Systems Group and complement its purchase two years ago of systems integrator PRC Inc. The $432 million cash purchase continues a trend among large Defense contractors to buy smaller companies whose core business is information technology.

"We provide a key part of Litton's plans for growth in information services and in the rapidly consolidating Defense industry size is becoming more important to compete more effectively " said Joe Ailinger spokesman for TASC.

By purchasing the Reading Mass.-based company Litton increases the work force in its Information Systems Group by 2 600 to 9 100 employees and most of the TASC employees already have security clearances. TASC's pool of skilled employees was a key factor in the purchase said Paul Nisbet an analyst at JSA Research Inc. Newport R.I.

"It takes a great deal of time to build up a force that would have all the appropriate clearances " Nisbet said. "It's very difficult to get into but easy to buy."

The purchase supports Litton's strategy of growing its IT business said Robert Stangarone a spokesman for Litton. The purchase gives Litton access to the large and profitable national intelligence business which has grown to a $26 billion market Stangarone said. "It also strengthens our position in the broader spectrum of information technology with such projects as the federal information legacy migration. Overall it's an excellent blending of capability " he said.

TASC's major contracts have been for providing systems engineering and the size of the awards it has won recently have grown. This year TASC was awarded a potential $100 million systems engineering integration contract by the Army Simulation Training and Instrumentation Command. TASC's role in the project is to produce various simulation environments for Army training and other uses.

TASC also is a subcontractor to SETA Corp. on its contract with the Defense Information Systems Agency's Joint Interoperability and Engineering Organization Systems Engineering program. SETA was one of eight businesses that won a piece of the $610 million contract this year to provide engineering services.

In addition TASC's weather forecasting technology used by commercial air lines and broadcasters will complement a PRC contract to supply the National Weather Service's Automated Weather Interactive Processing System (AWIPS) now being deployed.

Profitable Gain Litton also gains a company that has been consistently profitable since its founding in 1966 and one that does 87 percent of its business in the federal market. TASC has projected 1997 revenue of $433 million and had a $535 million backlog as of Sept. 30.

Litton which increased its revenue from IT contracts from $975 million in fiscal 1996 to about $1.1 billion in fiscal 1997 said when the acquisition is complete about 35 percent of its total revenue will be from IT contracts.

The transaction is contingent upon review by government regulatory agencies and must be approved by Primark shareholders. Nisbet said to keep pace with its competitors Litton had to either buy an IT-focused company or consider getting out of information systems.

Litton was thrust into the federal IT market when it bought PRC its first IT acquisition for $425 million in 1995. PRC had won the contract for the $2.5 billion Defense Department Supermini pact and AWIPS.


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