US defence contractors ATK, Orbital Sciences to merge in $5 bn deal

US-based Alliant Techsystems Inc (ATK), the world's largest ammunition maker, yesterday announced that it will merge its aerospace and defence groups with rocket maker Orbital Sciences Corp in a $5 billion deal.

ATK will also spin off its outdoor sporting business, which makes sporting rifles, holsters and harnesses, to its shareholders. The business had revenues of $2.2 billion in 2013.

ATK is yet to give a name for the outdoor sporting company, but said that Mark DeYoung, current president and CEO of ATK, will be the chairman and CEO of the new sporting division, which will be headquartered in Utah and is expected to employ nearly 5,800 people.

The company's sporting and aerospace and defence businesses operate in two fundamentally different markets with very different operating dynamics, compliance requirements, customer sets and growth opportunities.

As standalone companies, they will be more focused businesses, with clear and distinct strategic visions and objectives, additional operational flexibility and the financial strength to make the most of their unique opportunities in their respective industries.

"We are creating two strong, standalone companies committed to sustained leadership and success in their markets," said  DeYoung.

He also said, Orbital has been a customer of ATK for more than 25 years. "We are familiar with each other and each company's capabilities, and our respective cultures share a commitment to innovation and excellence."

David W. Thompson, Orbital's Chairman, President and Chief Executive Officer, said this merger-of-equals combination of Orbital and ATK 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, Orbital ATK will deliver even more affordable space, defense and aerostructures systems to our existing customers and be well positioned to expand into adjacent markets," Thompson added.

Post closing of the ATK-Orbital deal, ATK will change its name to Orbital ATK, Inc, which will have total revenues of $4.5 billion and order backlog of $11 billion.

Current ATK shareholders will own approximately 53.8 per cent of Orbital ATK, while Orbital shareholders will own approximately 46.2 per cent. Approximately $1.7 billion of existing ATK debt will remain at Orbital ATK.

Orbital's current chairman, president and CEO David Thompson will serve as president and CEO of Orbital ATK, which will be headquartered in Dulles, where Orbital is currently located, and is expected to have around 13,000 employees.

Orbital ATK will serve the aerospace industry through launch vehicles, spacecraft and satellites, military and commercial structures, special mission aircraft; defence requirements through munitions, weapons systems, defence electronics systems, targets, interceptor vehicles and missile products.

The merger is expected to generate pre-tax cost synergies of $70-100 million through the elimination of duplicate public company costs, economies of scale, and additional streamlining.

Virginia-based ATK operates in three business segments - aerospace group, defense group, and sporting group.

Since entering the commercial ammunition and sporting accessories market in 2001, ATK has built a leading position in the shooting sports for hunters, shooting enthusiasts and law enforcement professionals.

It expanded its business markets into the outdoor recreation industry through the 2013 acquisitions of Savage Sports Corp and Bushnell Group Holdings for a total of $1.3 billion.

ATK Aerospace and Defence Group is the world's top producer of solid rocket propulsion systems and a growing supplier of military and commercial aircraft structures and satellite systems.

It is an industry leader in ammunition, precision and strike weapons, defense electronics systems, missile warning solutions and tactical rocket motors across air, sea and land-based systems

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 exploration 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 US Government agencies and laboratories.