PAE (NASDAQ: PAE, PAEWW), a global leader in delivering smart
solutions to the U.S. government and its allies, today announced
that its subsidiary has entered into a definitive agreement to
acquire CENTRA Technology, Inc., a leading independent provider of
high-end intelligence support, information analytics, engineering
services and other advanced technology solutions, for approximately
$208 million (net of tax benefits) in cash. This represents a
transaction multiple of approximately 8.8x CY2020 adjusted EBITDA,
adjusted for the net present value of tax assets and estimated cost
synergies.
PAE President and CEO John Heller commented:
“The acquisition firmly aligns with PAE’s
strategy of expanding the business to higher-margin market areas.
By acquiring CENTRA, PAE realizes a significant milestone in the
execution of our strategic growth plan to be a provider of
innovative, higher margin, knowledge-based offerings in attractive,
resilient end markets. This exciting opportunity builds on our
intelligence analysis capabilities while increasing customer
access, accelerating growth and enhancing shareholder value.
Additionally, the acquisition of CENTRA is expected to be accretive
to adjusted EBITDA margins and free cash flow.”
CENTRA is an intelligence analysis service
provider focused on providing mission critical services to the
intelligence community and other U.S. national and homeland
security customers. Headquartered in Burlington, Massachusetts,
CENTRA has more than 760 employees, a majority of whom have top
secret clearances with subject matter expertise across a broad
range of critical national security issues.
"This transaction will further enhance CENTRA’s
capabilities and create new opportunities for our customers and
employees," said Jack Barry, Chief Operating Officer of CENTRA
Technology. “The customers, contracts and offerings of each
business complement each other well and will be attractive for all
stakeholders."
Strategic and Financial Benefits of the
Acquisition
- Significantly Increases
Addressable Market: Transaction
increases PAE’s total addressable market by approximately $36
billion in annual spending; provides PAE the ability to actionably
pursue several large contracts in new market segments.
- Broadens Service and
Technology Offerings: Brings new,
value-add service and technology offerings to the portfolio;
including intelligence analysis, communication systems integration
and research and development services.
- Expands Customer Footprint
and Contract
Vehicles: Adds new
customers within the Intelligence Community and Departments of
Defense and Homeland Security, in addition to providing access to
several large contract vehicles.
- Provides Additional
Stability to Financial
Profile: CENTRA’s
contract portfolio is highlighted by low levels of recompete risk
coupled with several recent large new business wins that provide
approximately $1 billion of backlog, or about 4x CY2020 revenue
estimates.
- Adds Uniquely Qualified
Employees to Workforce: Provides highly skilled and
cleared professionals, including about 700 employees with Top
Secret/Sensitive Compartmented Information clearances with subject
matter expertise across a range of critical national security
issues.
Financing and Approvals
The transaction has been unanimously approved by
the boards of directors of both PAE and CENTRA and is expected to
close in the fourth quarter of 2020, subject to regulatory
approvals and customary closing conditions. PAE expects to fund the
purchase price of approximately $208 million with cash on hand and
utilization of its delayed draw term loan.
Advisors
Morgan, Lewis & Bockius LLP acted as legal
advisor and Renaissance Strategic Advisors, LLC acted as strategic
advisor to PAE in connection with the transaction.
Greenberg Traurig, LLP acted as legal advisor
and Citizens Capital Markets, Inc. acted as financial advisor to
CENTRA in connection with the transaction.
Conference Call and Webcast
PAE will host a conference call and webcast,
October 26, 2020, at 8 a.m. ET. and will post an investor
presentation to its website. Management will review details of the
acquisition, followed by a question-and-answer session. Listeners
and other interested parties will be able to access a presentation
summarizing the transaction on the PAE Investor Relations
website.
Interested parties are invited to join the
webcast from the PAE Investor Relations website. Due to the
COVID-19 pandemic, teleconference providers globally are
experiencing significant increases in conference call volume. As
such, PAE recommends that parties participate by joining the
webcast. Alternatively, if the webcast is not practical, attendees
may listen to the conference call by dialing (855) 982-6676 and
entering conference ID 1796253. The international dial-in access
number is (614) 999-9188.
The company will post an archive of the webcast
following the call on the PAE Investor Relations website.
About PAE
For 65 years, PAE has tackled the world’s
toughest challenges to deliver agile and steadfast solutions to the
U.S. government and its allies. With a global workforce of
approximately 20,000 on all seven continents and in approximately
60 countries, PAE delivers a broad range of operational support
services to meet the critical needs of our clients. Our
headquarters is in Falls Church, Virginia. Find us online at
pae.com, on Facebook, Twitter and LinkedIn.
Forward-Looking Statements
This press release contains a number of “forward-looking
statements” as defined in the Private Securities Litigation Reform
Act of 1995. These forward-looking statements include, but are not
limited to, statements about our expectations and projections
regarding the acquisition of CENTRA Technology, Inc., PAE’s
possible or assumed future results of operations, financial
results, backlog, estimation of resources for contracts, strategy
for and management of growth, needs for additional capital, risks
related to government contracting generally, including failures to
properly manage projects and subcontractors, susceptibility to
claims, litigation and other disputes, and risks related to public
health crises. These forward-looking statements are based on PAE’s
management’s current expectations, estimates, projections and
beliefs, as well as a number of assumptions concerning future
events.
These forward-looking statements are not guarantees of future
performance, conditions or results, and involve a number of known
and unknown risks, uncertainties, assumptions and other important
factors, many of which are outside PAE’s management’s control, that
could cause actual results to differ materially from the results
discussed in the forward-looking statements.
Forward-looking statements included in this release speak only
as of the date of this release. PAE does not undertake any
obligation to update its forward-looking statements to reflect
events or circumstances after the date of this release except as
may be required by the federal securities laws.
Non-GAAP Financial Measures
The Company uses adjusted EBITDA, adjusted EBITDA margin and
free cash flow as supplemental non-GAAP measures of performance.
PAE defines EBITDA as net income excluding (i) interest expense,
(ii) provision for or benefit from income taxes and (iii)
depreciation and amortization. Adjusted EBITDA excludes certain
amounts included in EBITDA. Adjusted EBITDA margin is calculated as
adjusted EBITDA divided by revenues expressed as a percentage. Free
cash flow is defined as cash flow provided by operating activities
less capital expenditures.
PAE believes that the use of these non-GAAP financial measures
provides an additional tool for investors to use in evaluating the
acquisition by PAE of CENTRA Technology Inc. and the projected
future operating and financial results of PAE. The non-GAAP
financial measures provided in this press release are
forward-looking.
PAE is not providing a quantitative reconciliation of adjusted
EBITDA or adjusted EBITDA margin in reliance on the “unreasonable
efforts” exception for forward-looking non-GAAP measures set forth
in SEC rules because certain financial information, the probable
significance of which cannot be determined, is not available and
cannot be reasonably estimated without unreasonable effort and
expense. In this regard, the Company does not provide a
reconciliation of forward-looking adjusted EBITDA (non-GAAP) to
GAAP net income, due to the inherent difficulty in forecasting and
quantifying certain amounts that are necessary for such
reconciliation. Because certain deductions for non-GAAP exclusions
used to calculate projected net income may vary significantly based
on actual events, the Company is not able to forecast on a GAAP
basis with reasonable certainty all deductions needed in order to
provide a GAAP calculation of projected net income at this time.
The amounts of these deductions may be material and, therefore,
could result in projected GAAP net income being materially less
than is indicated by estimated adjusted EBITDA (non-GAAP). In
addition, the Company does not provide a reconciliation of
forward-looking free cash flow (non-GAAP) to GAAP cash flows
provided by operating activities and GAAP cash used in investing
activities, due to the inherent difficulty in forecasting and
quantifying certain amounts that are necessary for such
reconciliation. Because certain line items used to calculate
projected cash flows provided by operating activities and cash used
in investing activities may vary significantly based on actual
events, the Company is not able to forecast on a GAAP basis with
reasonable certainty all line items needed in order to provide a
GAAP calculation of projected free cash flow at this time.
Use of Projections
This presentation contains projections with respect to the
company and CENTRA Technology, Inc. The company’s independent
auditors have not audited, reviewed, compiled, or performed any
procedures with respect to the projections for the purpose of their
inclusion in this presentation, and accordingly, did not express an
opinion or provide any other form of assurance with respect thereto
for the purpose of this presentation. These projections should not
be relied upon as being necessarily indicative of future
results.
For investor inquiries regarding PAE:
Mark ZindlerVice President Investor
RelationsPAE703-717-6017mark.zindler@pae.com
For media inquiries regarding PAE:
Terrence NowlinSenior Communications
ManagerPAE703-656-7423terrence.nowlin@pae.com
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