Alcatel-Lucent (News - Alert), in a continuation of the implementation “The Shift Plan” to reorganize itself into a more focused specialist solutions provider and put itself in a firmer long-term financial position, announced it signed a definitive agreement to sell its subsidiary, LGS Innovations LLC, to a US-based company owned by a Madison Dearborn Partners-led investor group that includes CoVant. Strategic divestitures of what management believes are non-core assets have been a critical component of The Shift Plan since CEO Michel Combes unveiled it back in June of this year.
While the specific assets in this transaction are a bit of a surprise, especially given current online speculation that Alcatel-Lucent (ALU) is possibly set to announce the sale of its enterprise business, the fact that they are engaged in an asset sale is not.
CEO Combes in commenting on the deal noted: “We have, under The Shift Plan, made a firm commitment to divesting assets as and when the right opportunity arises for Alcatel-Lucent, and for the assets themselves. Today’s agreement with Madison Dearborn and CoVant represents the right opportunity for Alcatel-Lucent and LGS Innovations. We wish the LGS team well as they start a new chapter in their long and trusted service to the US Federal Government.”
Not a Big Deal but Indication the Shift is in Full Swing
The cash transaction will be for up to USD$ 200 million, of which 50 percent will be paid at closing, and up to 50 per cent in a subsequent variable component to be determined on the divested company’s results of operations for FY 2014. Closing is subject to certain conditions, including US Government approvals, and is targeted to occur in Q1 2014.
LGS Innovations provides secure networking, satellite communications, VoIP, optical routers and other solutions for the US national security, defense, and advanced research communities. Going all the way back to the old AT&T (News - Alert), it has been a trusted partner of the US Federal Government for over 60 years.
For those unfamiliar, Madison Dearborn is a leading private equity firm that invests across a broad spectrum of industries, including business and government services. The firm has raised six funds with aggregate capital of over $18 billion and has completed approximately 125 investments. Founded by former executives of Anteon International CoVant is a holding company focused on acquiring and growing companies in the federal technology solutions marketplace.
“LGS Innovations is a highly attractive business and we’re pleased to have the opportunity to evolve the company,” commented Doug Grissom, a managing director at Madison Dearborn and head of the firm’s Business and Government Services team. “We look forward to partnering with the management team and CoVant to the benefit of LGS Innovations LLC’s customers and employees.”
Joseph Kampf, CEO of CoVant, and the former CEO of Anteon International and current board director of A-T Solutions said: “We plan to capitalize on LGS Innovations’ competitive positioning and work to expand its presence within the US Government and drive its revenue by broadening its customer base, products, and solutions.”
Given all of the headlines and concerns involving security issues, allowing these assets to be in the care of US-based entities makes the timing of the transaction opportune as it eliminates going forward what could become some sticky issues in U.S. government procurement issues. That said, based on ALU’s position as a dominant solutions supplier to all of the major U.S. service providers, it is not likely to impact the company’s deep involvement in the development of technologies in network security.
Edited by Cassandra Tucker