Federal Data comes into Northrop fold

In a move to bolster its place in the government information technology

market, Northrop Grumman Corp. announced Sept. 6 that it had signed an agreement

to acquire Federal Data Corp. (FDC), a systems integrator and software solutions

provider.

FDC — whose federal customers include the National Institutes of Health,

NASA, the Federal Aviation Administration and others — will be folded into

the operations of Logicon Inc., a Northrop Grumman company, said Herb Anderson,

president and chief executive officer of Herndon, Va.-based Logicon.

"One of the major reasons we looked at [FDC] is that we do a lot of the

same things but not with the same agencies," Anderson said, adding that

the acquisition gives both companies growth potential in areas where they

previously have enjoyed only limited success.

The deal enables Logicon to offer an arsenal of high-end IT services

and support and gives FDC easier access to the Defense Department and other

government niches, Anderson said. Logicon's areas of expertise include command,

control, communications and intelligence; weapons systems; and training

and simulation.

"This fit just like a glove for us in our strategy for growth," he said.

Phil Finnegan, senior analyst at Fairfax, Va.-based Teal Group Corp.,

a defense and aerospace research and consulting firm, said the acquisition

is a good fit for Northrop Grumman for several reasons.

"Northrop Grumman had a problem because they have done a good job of

replacing revenues from the B-2 stealth bomber program, but they need to

do more," Finnegan said. "IT has been a good area for them. They've made

four acquisitions in IT since 1997, but this acquisition is important because

it takes them further into commercial IT, which has higher growth than defense

IT."

The transaction is valued at $302 million and is expected to be complete

within 45 days, pending governmental approval. At that point, Anderson and

Dan Young, president and CEO of Bethesda, Md.-based FDC, will head a transition

team composed of representatives from both companies to discuss myriad issues,

including the FDC brand name, the location of corporate offices and personnel,

and potential layoffs and job changes.

Young said FDC employees found out about the acquisition on Sept. 6 with

the rest of the world, and although he anticipates "a lot of vultures hanging

around" to try and lure away employees, he said he does not expect a backlash

from workers.

The Carlyle Group, the private investment firm that bought FDC in 1995,

had been in discussions with Northrop Grumman since January about a possible

acquisition, Young said.

This is not the first time the two companies have done business together,

Finnegan said. The acquisition comes on the heels of a deal in July in which

Northrop Grumman sold its commercial aerostructure group to the Carlyle

Group for $1.2 billion, and they have also worked together on acquisitions

in the past, he said.

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