Lockheed Martin To Buy Sikorsky; May Spin Off Its IT & Technical Services

United Technologies (UTX) had been considering its strategic options for its Sikorsky helicopter operations for quite some time. At first, it seemed the storied chopper company would end up flying solo via a spinoff due to tax reasons, but, as time went by, a sale seemed to be more and more likely. Eventually, the WSJ (and others) identified Lockheed Martin (LMT) as the likely ‘winner’ and the sale announcement was formally made last week. Lockheed will pay about $9b for the company, a hefty price which is slightly offset by $1.9b of expected tax benefits coming their way as a result of the deal. Somewhat ironic. The deal is the company’s biggest in over twenty years and demonstrates the company’s long term belief in the space. It’s a big bet on the future of the helicopter industry which has been struggling recently as its main customers (oil & gas companies and the military) have been cutting spending. Despite some long term upside, The Economist thinks the deal is quite a gamble for Lockheed. For what it’s worth, Wall Street doesn’t expect any anti-trust issues to arise despite a more active Justice Department.

In addition to announcing this new growth initiative, Lockheed also unveiled plans to slim down:

Separately, Lockheed Martin will conduct a strategic review of alternatives for its government IT and technical services businesses, primarily in the Information Systems & Global Solutions business segment and a portion of the Missiles and Fire Control business segment. The programs to be reviewed represent roughly $6 billion in estimated 2015 annual sales and more than 17,000 employees.

“As global security market dynamics shift, this review will strengthen our competitive posture, enabling sustained, profitable growth and positioning Lockheed Martin to deliver value for customers, shareholders and employees,” Hewson said.

Lockheed Martin is a leading IT and technical services provider around the globe, and with a series of recent wins in the U.S., Europe and Australia, the business is well positioned for the future. However, following recent shifts in market dynamics, Lockheed Martin will explore whether the businesses can achieve greater growth and create more value for customers and shareholders outside of the Corporation. The strategic review is expected to result in a spin-off to Lockheed Martin shareholders or sale of these components.

So…a strategic review for Lockheed with a potential sale or spinoff. The circle of spins – one goes away, yet immediately another one possibly appears. We will keep you updated as this progresses.

Disclosure: Author holds no position in any stock mentioned.