Orbital & ATK's Aerospace and Defense Groups to Combine in $5 Billion Merger-of-Equals to Create "Orbital ATK"


Orbital Sciences Corporation (ORB) today announced that it has entered into a definitive agreement with Alliant Techsystems Inc. (ATK) , which will combine Orbital and ATK’s Aerospace and Defense (A&D) Groups to create a $4.5 billion (combined calendar year 2013 annual revenue), 13,000-person space, defense and aviation systems developer and manufacturer. The new company, to be called Orbital ATK, Inc., will serve U.S. and international customers with leading positions in the markets for space launch vehicles and propulsion systems, tactical missiles and defense electronics, satellites and space systems, armament systems and ammunition, and commercial and military aircraft structures and related components. As part of the transaction, ATK will spin off its Sporting Group, which focuses on commercial sporting equipment, to its shareholders.

The tax-free stock-for-stock merger-of-equals transaction, valued at approximately $5.0 billion based on Orbital’s closing stock price yesterday, will combine Orbital’s small- and medium-class satellite and launch vehicle product lines with ATK A&D’s rocket propulsion, composite structures and space power systems to produce even more capable and affordable space and missile defense products. At the same time, it will enhance ATK A&D’s strategic and tactical missile systems and propulsion, precision weapons and military armament, and commercial and military aircraft programs by leveraging Orbital’s systems design, engineering and integration capabilities to provide greater value-added to current and future customers.

Orbital ATK will draw on a talented and experienced group of leaders from both organizations for key governance and management positions. A 16-member Board of Directors will be led by Chairman Gen. Ronald R. Fogleman (U.S. Air Force, ret.) and will include seven directors from ATK’s Board and nine directors from Orbital’s Board.

Mr. David W. Thompson, Orbital’s President and Chief Executive Officer, will be President and Chief Executive Officer of the new company; Mr. Blake E. Larson, President of ATK’s Aerospace Group, will serve as its Chief Operating Officer; and Mr. Garrett E. Pierce, Orbital’s Chief Financial Officer, will hold the same position in the new company. Other key management positions will be determined prior to the transaction’s closing, with an equitable and balanced selection of senior executives from each company expected in the new organization.

“This merger-of-equals combination of Orbital and ATK Aerospace and Defense brings together two of the space and defense industry’s most innovative developers and cost-efficient manufacturers who have worked closely together for over 25 years. By building on complementary technologies, products and know-how and highly-compatible cultures, the new Orbital ATK will deliver even more affordable space, defense and aviation systems to our existing customers and be strongly positioned to expand into adjacent areas,” said Mr. Thompson.

“The proposed merger will generate cost and revenue synergies and create a more streamlined and competitive operator,” said Mr. Mark W. DeYoung, ATK’s Chief Executive Officer. “We see opportunities to build on ATK’s success in Aerospace and Defense through a combination with Orbital’s proven track record in creating new launch vehicles, satellites and other advanced space technologies. We are both focused on enhancing the capability of existing customer systems by developing solutions that can be more flexibly deployed to support their mission with enhanced cost-effectiveness. We also see significant opportunities for growth as new programs are initiated or begin to ramp up production.”

Orbital ATK will employ about 13,000 people, including over 4,300 engineers and scientists and 7,400 production and operations specialists, at engineering centers, research laboratories, manufacturing facilities, and test and launch sites in 17 states. Employees will benefit from expanded long-term career opportunities and enhanced job stability by being part of a larger, more diverse and financially stronger enterprise dedicated to technological innovation, fast product cycles and operational efficiency. The combined company will be headquartered at Orbital’s existing Dulles, Virginia campus, with major employee sites in Utah, Missouri, Virginia, Arizona, Maryland, West Virginia, California and Minnesota.

Based on 2013 financial results, the new company would have combined annual revenues of about $4.5 billion, EBITDA over $575 million and total contract backlog more than $11 billion. Net debt of Orbital ATK at closing is expected to be about $1.4 billion, after taking into account combined cash balances of approximately $300 million. Annual revenue and cost synergies of $220-300 million are expected by 2016, consisting of $150-200 million of incremental annual revenue and $70-100 million of annual cost reductions.

In the merger, ATK shareholders will own approximately 53.8% of the equity of the combined company and Orbital shareholders will own approximately 46.2%. The combination, which has been unanimously approved by the Boards of both companies, is to be effected in a tax-free “Morris Trust” transaction structure, with a spin-off of ATK’s Sporting Group to its shareholders immediately prior to the merger. The merger is conditioned on approval by the shareholders of both companies, the receipt of regulatory approvals, and other customary closing conditions. The transaction is expected to close by the end of 2014.

Citigroup acted as financial advisor to Orbital while Hogan Lovells US LLP acted as Orbital’s legal advisor.

Investor and Analyst Conference Call Details

Orbital and ATK executives will conduct a conference call with financial analysts and investors this morning, beginning at 9:00 a.m. (EDT). The companies welcome members of the investment community to listen to the call live. A copy of management’s presentation will be available in the investor relations section of www.orbital.com.

The call will be hosted by Mr. David Thompson, Chairman, President and Chief Executive Officer of Orbital and Mr. Mark DeYoung, President and Chief Executive Officer of ATK. They will be joined by Mr. Garrett Pierce, Orbital Chief Financial Officer and Mr. Neal Cohen, ATK Chief Financial Officer.

The call is being webcast and can be accessed via the investor relations page at www.orbital.com. For those who cannot participate in the live webcast, a telephone recording of the conference call will be available. The telephone number is 719-457-0820 and the confirmation code is 7630707. The recording will be available for one month after the call. Institutional investors can access the call via the password-protected event management site StreetEvents (www.streetevents.com).

About ATK

ATK is an aerospace, defense and commercial products company with operations in 22 states, as well as in Puerto Rico and overseas. ATK’s Aerospace Group is a market leader in solid rocket propulsion systems for space and strategic launch vehicles, satellite structures and power systems, and aerospace composite structures. The company’s Defense Systems Group is a market leader in precision weapons, tactical missiles and related propulsion systems, and armament systems and ammunition products. News and information can be found on the Internet at www.atk.com, on Facebook at www.facebook.com/atk or on Twitter@atk.

About Orbital

Orbital develops and manufactures small- and medium-class rockets and space systems for commercial, military and civil government customers. The company’s primary products are satellites and launch vehicles, including low-Earth orbit, geosynchronous-Earth orbit and planetary spacecraft for communications, remote sensing, scientific and defense missions; human-rated space systems for Earth-orbit, lunar and other missions; ground- and air-launched rockets that deliver satellites into orbit; and missile defense systems that are used as interceptor and target vehicles. Orbital also provides satellite subsystems and space-related technical services to government agencies and laboratories. More information about Orbital can be found at www.orbital.com. Follow the company on Twitter @OrbitalSciences and on Facebook at www.facebook.com/OrbitalSciencesCorp

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