SAIC-Frederick, Inc.'s $473 Million Aquisition to More than Double Commercial Health Care Business
Science Applications International Corp.'s $473 million acquisition of maxIT Healthcare Holdings Inc. will more than double the company's commercial health care business and make good on a two-year strategy to expand SAIC's presence in that market, company executives told Washington Business Journal Wednesday.
The deal, announced Tuesday evening and expected to close in August, will create a health care business worth just north of $850 million and add about 1,300 employees to the SAIC workforce. Westfield, Ind.-based maxIT will function as a wholly owned subsidiary, with no layoffs planned and additional hires anticipated.
"We've had a strategy game plan laid out for the health care business for two years now, and we're executing on that," said Clement Chen, senior vice president for SAIC's Strategic Development, Infrastructure, Energy, Health and Product Solutions Group. "There were archetypes of companies we were targeting, but mergers and acquisitions are always a function of timing. With maxIT, we pulled the trigger when it entered into the strike zone."
That decision will also please analysts, who have criticized SAIC for not being more aggressive with acquisitions — particularly given the company's healthy amount of cash on hand.
"These things are like pushing a rope. You can't coordinate from a timing standpoint," Chen added. "it's a function of market."
The acquisition more than doubles SAIC's commercial health care business, which will make up the majority of revenue for the company's overall health care unit. It also complements the purchase a year ago of Vitalize Consulting Solutions Inc. — another provider of clinical, business and information technology services for health care companies — and will result in more than than 1,700 health care consultants, all with 12 to 15 years of expertise in health care.
Even with the move into commercial health care, the company will remain committed to federal health care IT, said Steve Comber, senior vice president and general manager of SAIC's Health Solutions Business Unit. SAIC has supported systems at the Department of Veterans Affairs and the Defense Department for many years.
"For us to be relevant and strong and continue to play in the federal market, it was important to broaden into the commercial world," Comber said. "It's a deliberate strategy."
SAIC's larger footprint in commercial health care also stands to offset losses that will come from federal budget cuts, as noted in a report released by New York-based Lazard Capital Markets Wednesday morning, which predicted ongoing efforts by the company to diversify revenue "away from defense with similar acquisitions in the future."
Indeed, additional acquisitions are possible, Chen noted, but he also emphasized that federal budget cuts did not motivate the deal.
"Our commitment to the market is a little different from many of the large, Tier 1 defense companies, that view energy and health care as a hedge against weaknesses in their core," he said. "Yes, it helps, but that's not why we're doing it. Health and energy are mainline businesses as a matter of course, not market conditions."