Unisys Corp Acquisition(s)

 
TIDMUSY 
 
Unisys to Sell Its U.S. Federal Business to SAIC for $1.2 Billion, or 13x 
Adjusted EBITDA, a Significant Premium to Unisys' Trading Multiple; Preliminary 
    Full-Year 2019 Unisys Results Indicate Company Achieves Guidance on All 
                               Provided Metrics 
 
Based on preliminary results(1), non-GAAP adjusted revenue(2) growth and 
non-GAAP operating profit(3) margin expected to be toward upper end of 
full-year 2019 guidance ranges of 3% to 7% and 8.25% to 9.25%, respectively; 
Adjusted EBITDA(4) margin expected to be at low end of full-year 2019 guidance 
range of 14.4% to 16.0% 
 
Transaction to significantly strengthen company's balance sheet and as a result 
increase operational flexibility; proceeds are expected to be substantially 
tax-free and used to pay down debt and reduce pension obligations; company 
adopts tax asset protection plan 
 
Company to leverage strong performance of global Enterprise Solutions business, 
continue to drive digital transformation for Government (excludes U.S. 
Federal), Commercial and Financial Services clients with innovative solutions 
including Unisys Stealth®, CloudForte®, InteliServeT and ClearPath Forward® 
 
BLUE BELL, Pennsylvania, Feb. 6, 2020 -- Unisys Corporation (NYSE: UIS), a 
leader in digital transformation solutions, today entered into a definitive 
agreement to sell the company's U.S. Federal business to Science Applications 
International Corp. (SAIC) (NYSE: SAIC) for $1.2 billion. The transaction 
multiple of approximately 13x LTM 9/30/19 Adjusted EBITDA(5) represents a 
significant premium to Unisys' trading multiple. Net proceeds are largely 
expected to be used to pay down debt and reduce pension obligations, thereby 
significantly improving Unisys' balance sheet, its U.S. pension funded status 
and overall financial flexibility. The transaction was unanimously approved by 
the Unisys Board of Directors and is expected to close in the first half of 
2020, subject to customary closing conditions. 
 
Unisys' U.S. Federal business represents more than 1,900 associates, with 
approximately $689 million in revenue for the LTM period ended September 30, 
2019. 
 
"This transaction comes at a significant premium to the Unisys trading 
multiple, and is a tribute to the unique and attractive business that our U.S. 
Federal colleagues have built over many years," said Unisys Chairman and CEO 
Peter Altabef. "Under the leadership of Venkatapathi "PV" Puvvada, we have 
become known as a true innovator in the federal market, leveraging powerful 
intellectual property and a world-class team. This transaction will allow us to 
significantly enhance our balance sheet, which will create increased 
operational flexibility that will ultimately position us to better serve our 
clients while delivering increased value to investors." 
 
Use of Proceeds 
 
Unisys intends to largely use the net proceeds from the sale to pay down debt 
and reduce its U.S. pension obligations by applying a portion of the net 
proceeds to its U.S. defined benefit pension plans: 
 
  * Pro forma for the transaction, the company's net debt (inclusive of pension 
    deficit) is expected to be reduced by approximately $1.04 billion. 
 
  * The company intends to fully redeem its $440 million of Senior Secured 
    Notes in accordance with the terms of those notes. 
 
  * The remaining net proceeds targeted for net debt reduction ($600 million) 
    are expected to be contributed to U.S. pension plans and applied toward the 
    minimum required contributions in 2020, 2021 and 2022. 
 
      + This will effectively remove the requirements to make any cash 
        contributions to the U.S. plans out of operating cash flow in 2020, 
        2021 and 2022. 
 
      + This will also increase the funded status of the U.S. pension plans to 
        allow for potential removal of pension liability through bulk lump sum 
        offerings and potential annuitization of obligations. 
 
      + Cumulative required contributions into worldwide pension plans from 
        2020 through 2025 are expected to be reduced to approximately $775 
        million on a pro forma basis from $1.375 billion based on assumptions 
        as of year-end 2018. 
 
      + The company will have the flexibility to make additional discretionary 
        contributions to smooth future funding requirements beyond 2022. 
 
  * The company's unfunded pension deficit is expected to be reduced from $1.74 
    billion as of year-end 2018 to approximately $1.14 billion on a pro forma 
    basis. 
 
  * Pro forma net debt inclusive of pension obligations is expected to be 
    approximately $860 million, relative to $1.9 billion pre-transaction, 
    resulting in pro forma net leverage of 2.4x LTM 9/30/19 Adj. EBITDA(6), 
    relative to 4.2x pre-transaction. 
 
  * The company expects to offset any federal taxable gains from the sale with 
    its existing unrestricted tax assets and expects additional tax assets to 
    be generated by the aforementioned pension contributions. 
 
    "In addition to the benefits from a meaningfully improved balance sheet, we 
    see Unisys as having significant financial upside potential, as Enterprise 
    Solutions has always represented the key area for improvements to 
    efficiency and therefore our profitability," said Mike Thomson, senior vice 
    president and CFO of Unisys. "Unisys will continue to execute on plans 
    already established for driving improved operating margin, while also 
    retaining the disciplined focus on cash flow that has been key to our 
    recent transformation." 
 
    Built on Strong Performance, Innovative Solutions 
 
    "Our innovative solutions and focus on security have made us a critical 
    partner to many of the largest, most complex enterprises in the world and 
    helped improve the financial performance of Enterprise Solutions in recent 
    periods," Eric Hutto, senior vice president and president, Enterprise 
    Solutions said. "We will use the same technology-enabled, intellectual 
    property-based solutions that have helped drive the company's recent 
    success, such as Unisys Stealth®, CloudForte®, InteliServeT and ClearPath 
    Forward®. Our increased capital structure flexibility will allow for 
    further investment in new solutions and more optionality in deal pursuits, 
    with a disciplined focus on optimizing cash flow and profitability." 
 
    Tax Asset Protection Plan 
 
    In conjunction with the transaction, Unisys also announced today that it 
    has adopted a Tax Asset Protection Plan (the "Plan"), which is designed to 
    protect Unisys' tax assets in contemplation of the sale discussed in this 
    release. This Plan is similar to tax benefit protection plans adopted by 
    other public companies with significant tax attributes. 
 
    Unisys' ability to use its tax attributes would be significantly limited if 
    there were an "ownership change" for federal tax law purposes, which 
    generally occurs when the percentage of Unisys' ownership of one or more 5% 
    shareholders has increased by more than 50% over the lowest percentage 
    owned by such shareholders at any time during the prior three years 
    (calculated on a rolling basis). 
 
    The Plan is designed to protect Unisys' valuable tax assets by reducing the 
    likelihood of an 'ownership change' through actions involving Unisys' 
    securities. 
 
    As part of the Plan, Unisys has declared a dividend of one preferred share 
    purchase right (a "Right") for each outstanding share of Unisys common 
    stock, par value $0.01 per share, payable to stockholders of record as of 
    February 15, 2020 as well as to holders of Unisys common stock issued after 
    that date. In the Plan, the acquisition of 4.9% or more of the Unisys 
    common stock would trigger the operation of the Rights. There is no 
    guarantee, however, that the Plan will prevent Unisys from experiencing an 
    ownership change. 
 
    Unisys' Board of Directors has the discretion under certain circumstances 
    to exempt acquisitions of Unisys' securities from the provisions of the 
    Plan. The Plan may be amended by Unisys' Board at any time. 
 
    The issuance of the Rights will not affect Unisys' reported earnings per 
    share and is not taxable to Unisys or its stockholders. 
 
    Additional information regarding the Plan will be contained in a Form 8-K 
    and in a Registration Statement on Form 8-A that Unisys Corporation filed 
    with the Securities and Exchange Commission today. 
 
    Advisors 
 
    Centerview Partners LLC is serving as exclusive financial advisor and 
    Sullivan & Cromwell LLP is serving as legal advisor to Unisys. 
 
    Conference Call 
 
    A conference call will be hosted at 8:00am EST on February 6, 2020 to 
    provide an overview of the transaction and to address questions from the 
    financial and advisory community. Please use the link below to access the 
    webcast: 
    https://services.choruscall.com/links/uis200206.html 
 
    (1) The preliminary results set forth in this release are unaudited and 
    remain subject to completion of the company's financial closing procedures. 
    The company will report its fourth quarter and full-year 2019 financial 
    results during its previously announced conference call to be held on 
    February 25, 2020. 
 
    Non-GAAP and Other Information 
 
    Although appropriate under generally accepted accounting principles 
    ("GAAP"), the company's results reflect revenue and charges that the 
    company believes are not indicative of its ongoing operations and that can 
    make its revenue, profitability and liquidity results difficult to compare 
    to prior periods, anticipated future periods, or to its competitors' 
    results. These items consist of certain portions of revenue, 
    post-retirement, debt exchange and cost-reduction and other expenses. 
    Management believes each of these items can distort the visibility of 

    trends associated with the company's ongoing performance. Management also 
    believes that the evaluation of the company's financial performance can be 
    enhanced by use of supplemental presentation of its results that exclude 
    the impact of these items in order to enhance consistency and 
    comparativeness with prior or future period results. The following measures 
    are often provided and utilized by the company's management, analysts, and 
    investors to enhance comparability of year-over-year results, as well as to 
    compare results to other companies in our industry. 
 
    (2)  Non-GAAP adjusted revenue - In 2018 and 2019, the company's non-GAAP 
    results reflect adjustments to exclude certain revenue. In 2018, this 
    includes revenue from software license extensions and renewals, which were 
    contracted for in 2017 and properly recorded as revenue at that time under 
    the revenue recognition rules then in effect (ASC 605). Upon adoption of 
    the new revenue recognition rules (ASC 606) on January 1, 2018, and since 
    the company adopted ASC 606 under the modified retrospective method whereby 
    prior periods were not restated, the company was required to include $53 
    million in the cumulative effect adjustment to retained earnings on January 
    1, 2018. ASC 606 requires revenue related to software license renewals or 
    extensions to be recorded when the new license term begins, which in the 
    case of the $53 million was January 1, 2018. The company has excluded 
    revenue and related profit for these software licenses in its non-GAAP 
    results since it has been previously reported in 2017. This is a one-time 
    adjustment and it will not reoccur in future periods. Additionally, the 
    company's non-GAAP results include adjustments to exclude certain revenue 
    and related profit relating to reimbursements from the company's 
    check-processing JV partners for restructuring expenses included as part of 
    the company's restructuring program. 
 
    (3) Non-GAAP operating profit - The company recorded pretax post-retirement 
    expense and pretax charges in connection with cost-reduction activities, 
    debt exchange and other expenses. For the company, non-GAAP operating 
    profit excluded these items. The company believes that this profitability 
    measure is more indicative of the company's operating results and aligns 
    those results to the company's external guidance, which is used by the 
    company's management to allocate resources and may be used by analysts and 
    investors to gauge the company's ongoing performance. During 2018 and 2019, 
    the company included the non-GAAP adjustments discussed in (2) herein. 
 
    (4) EBITDA & adjusted EBITDA - Earnings before interest, taxes, 
    depreciation and amortization ("EBITDA") is calculated by starting with net 
    income (loss) attributable to Unisys Corporation common shareholders and 
    adding or subtracting the following items: net income attributable to 
    noncontrolling interests, interest expense (net of interest income), 
    provision for income taxes, depreciation and amortization. Adjusted EBITDA 
    further excludes post-retirement, debt exchange, and cost-reduction and 
    other expenses, non-cash share-based expense, and other (income) expense 
    adjustments. In order to provide investors with additional understanding of 
    the company's operating results, these charges are excluded from the 
    adjusted EBITDA calculation. During 2018 and 2019, the company included the 
    adjustments discussed in (2) herein. 
 
    (5) Last twelve months effective 9/30/19, derived from Unisys' accounting 
    records, which are maintained in accordance with GAAP. The U.S. Federal 
    business has not been run on a standalone basis, and as such, certain 
    adjustments were based on management's best estimates of standalone 
    assumptions. 
 
     (6) Pro forma adjusted EBITDA excludes last twelve months Adjusted EBITDA 
    for U.S. Federal business as of 9/30/19. 
 
    About Unisys 
 
    Unisys is a global information technology company that builds 
    high-performance, security-centric solutions for the most demanding 
    businesses and governments. Unisys offerings include security software and 
    services; digital transformation and workplace services; industry 
    applications and services; and innovative software operating environments 
    for high-intensity enterprise computing. For more information on how Unisys 
    builds better outcomes securely for its clients across the Government, 
    Commercial and Financial Services markets, visit www.unisys.com. 
 
    Follow Unisys on Twitter and  LinkedIn. 
 
    Forward-Looking Statements 
 
    Any statements contained in this release are not historical facts, 
    including those regarding future performance, are forward-looking 
    statements under the Private Securities Litigation Reform Act of 1995. 
    These forward-looking statements are based on current expectations, 
    assumptions, anticipated events or trend, beliefs relating to matters that 
    are not historical in nature and involve risks and uncertainties that could 
    cause actual results to differ from expectations, all of which are 
    difficult to predict and many of which are beyond the control of the 
    company. Actual results may differ materially from the company's current 
    expectations depending upon a number of factors affecting the company's 
    business and risks associated with the transaction. These factors include, 
    among others: the ability to close the transaction on the expected timing 
    or at all; the ability to obtain required antitrust regulatory approval for 
    the transaction; the risk that a condition to closing of the transaction 
    may not be satisfied on a timely basis or at all; the failure of the 
    transaction to close for any other reason; buyer's access to financing for 
    the acquisition on a timely basis; the difficulty of predicting the timing 
    or outcome of pending or future litigation or government investigations; 
    the ability of the company to achieve the intended benefits of the 
    transactions (including, without limitation, risks related to the ability 
    of the company to repay certain indebtedness and reduce pension obligations 
    following the closing of the transaction); the risk related to the 
    diversion of management's attention from the company's ongoing business 
    operations; the effect of the announcement or pendency of the transaction 
    on the company's business relationships (including, without limitation, 
    customers and suppliers and other third parties), operating results, and 
    business generally; the risk related to the change of the company's 
    business structure and a smaller size of the company following the closing 
    of the transaction; the effect of the announcement or disruption from the 
    transaction making it more difficult to retain and hire key personnel; the 
    risk related to the company's ability to operate its business as a 
    going-concern following the closing of the transaction. These risks and 
    uncertainties are discussed in the company's reports filed with the SEC, 
    including but not limited to the company's annual report on Form 10-K and 
    in its subsequent reports on Form 10-Q and periodic reports on Form 8-K, 
    and from time to time in the company's other investor communications. 
    Except as expressly required by law, the company assumes no obligation to 
    update any forward-looking statement to reflect events or circumstances 
    that occur after the date on which the statement is made. 
 
    RELEASE NO.: 0206/9745 
 
    Unisys and other Unisys products and services mentioned herein, as well as 
    their respective logos, are trademarks or registered trademarks of Unisys 
    Corporation. Any other brand or product referenced herein is acknowledged 
    to be a trademark or registered trademark of its respective holder. 
 
    UIS-C 
 
    CONTACT: Investors: Courtney Holben, Unisys, 215-986-3379, 
    [e-mail]; Media: John Clendening, Unisys, 214-403-1981, 
    [e-mail] or Jared Levy, Sard Verbinnen & Co., 
    212-687-8080, [e-mail] 
 
 
 
END 
 

(END) Dow Jones Newswires

February 06, 2020 06:30 ET (11:30 GMT)