General Dynamics buying IT firm CSRA

WASHINGTON — Government contracting giant General Dynamics announced Monday that it is buying CSRA, a government IT services conglomerate that formed in 2015 amid a wave of industry consolidation.

The $9.6 billion deal includes $6.8 billion cash and $2.8 billion debt. General Dynamics will buy all shares of CSRA for $40.75 under the terms of the deal, a 32 percent premium from Friday’s closing price. The transaction is scheduled to close in the first half of 2018.

The deal turns Falls Church, Va.-based General Dynamics into a $9.9 billiona-year behemoth in government IT services, making it the second-largest firm in that sector behind Reston, Va.-based Leidos and ahead of Booz Allen Hamilton, CACI and SAIC.

The tie-in comes at a time when the government services market is projecting a resurgence after years of sequestration-induced consolidation, as the Trump administration moves to expand the size of the military and move IT systems to the cloud.

Such an aggressive move into the government services sector was seen as a surprise move for General Dynamics, which has classically relied on large government contracts for military hardware acquisitions like the Columbia-class nuclear submarine and the M1 Abrams tank. The company is also a market leader in commercial business jets through its Gulfstream subsidiary.