Subsequent event

12 Months Ended

Dec. 31, 2019

Subsequent Events [Abstract]

Subsequent event

Subsequent event

On February 5, 2020, the company entered into an asset purchase agreement to sell its U.S. Federal business to Science Applications International Corporation for a cash purchase price of $1.2 billion, subject to a net working capital adjustment. The U.S. Federal business provides certain products and services to U.S. federal government customers. The sale is expected to close in the first half of 2020 and is subject to receipt of regulatory clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 as well as the satisfaction or waiver of other customary closing conditions. The U.S. Federal business, which has operations in both of the company’s reporting segments of Services and Technology, generated 2019 revenue and pre-tax income of approximately $725 million and $100 million, respectively. The U.S. Federal business will be reported as discontinued operations in 2020.

When the sale is complete, the company expects to report an after-tax gain on the sale of approximately $1 billion. Due to the company’s U.S. tax position, no federal income tax is expected to be payable on the sale and, subject to the final purchase price allocation to the assets sold, state income taxes are expected to be minimal. The company primarily intends to use the net proceeds from the sale to redeem its senior secured notes due 2022 and reduce its obligations under its U.S. defined benefit pension plans.

In connection with the entry into the asset purchase agreement to sell the U.S. Federal business, the company also adopted a Tax Asset Protection Plan designed to protect the company’s tax assets in contemplation of the sale transaction. This plan is similar to tax benefit protection plans adopted by other public companies with significant tax attributes and is designed to protect the company’s valuable tax assets by reducing the likelihood of an “ownership change” through actions involving the company’s securities. See “Risk Factors-- Risks Related to the Announced Sale of the Company’s U.S. Federal Business-- An ‘ownership change’ could limit the company’s ability to utilize net operating losses and certain other tax attributes to offset the gain from the pending sale of the U.S. Federal business” for more information.