- Avantus has a $2.4bn pipeline of projects to deliver over five years
- Qinetiq agrees new $350mn debt facility to fund all-cash deal
Defence contractor Qinetiq (QQ.) is stepping up its presence in the US through a $590mn (£483mn) deal to acquire Avantus Federal from an arm of private equity firm NewSpring Capital.
Avantus provides cyber security, data analytics and software services to federal US defence and intelligence bodies. It had a turnover of $298mn last year and made an adjusted cash profit of $35.5mn. Discounting a $70mn tax credit, the amount being paid works out at 14.6x earnings, Qinetiq said.
The Hampshire-based business said the acquisition of Avantus would increase group revenue by 25 per cent and double the size of its US business.
“Avantus has a track record of high growth at attractive margins and is well-positioned across priority areas for key defence and intelligence customers in the US,” Qinetiq chief executive Steve Wadey said.
Avantus has earned “stable, double-digit” margins while growing revenue at a 10 per cent-plus rate and it has an order pipeline worth $2.4bn over the next five years. Ninety two per cent of its 1,150 employees have security clearance to deal with clients in the defence, intelligence and homeland security markets.
Qinetiq said the deal would be immediately earnings accretive, contributing to double-digit earnings per share growth in the first full year after completion. Although the deal needs regulatory clearance by US authorities, Qinetiq said it expects to complete by the end of this year. It is funding the all-cash offer through a new, $350mn debt facility.
In the current edition of the IC, former City analyst Robin Hardy highlighted Qinetiq as his pick of UK defence shares. It ii more expensive than BAE Systems (BA), with a price-to-earnings ratio of 16, but offers better growth prospects.
