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KeyW Completes Acquisition of Sotera Defense Solutions

HANOVER, Md., April 04, 2017 (GLOBE NEWSWIRE) — The KeyW Holding Corporation (NASDAQ:KEYW) today announced that it has completed its acquisition of Sotera Defense Solutions, Inc. (Sotera) in an all-cash transaction valued at approximately $235 million, inclusive of tax assets acquired as a result of the transaction. This transaction will augment the strengths of both companies to create a leading pure-play products and solutions provider to the Intelligence Community (IC) and related customers. Integration is expected to be completed by December 2017.

“The new KeyW offers a unique value proposition for customers, employees and shareholders alike,” said Bill Weber, KeyW’s chief executive officer. “We’ll purposely remain nimble to deliver advanced solutions that address ever-evolving, complex national security challenges. At the same time, we’ll have the scale to provide highly competitive cost models to further drive growth and create value for our customers and additional opportunities for our employees.”

Sotera is an agile, mid-sized national security technology company that delivers innovative systems, solutions and services in support of the critical missions and programs of Civilian Agencies, Department of Defense (DoD), Intelligence Community, Department of Homeland Security (DHS), federal law enforcement agencies and other parts of the federal government charged with ensuring the safety and security of our nation. With more than 1,100 employees, Sotera delivers essential enterprise IT, cyber security systems and operations, data fusion and analytics, intelligence analysis and C5ISR solutions to customers throughout the federal government and is a prime contractor on approximately 80% of its work.

Together, KeyW and Sotera will deliver an advanced portfolio of engineering and technology solutions, including cyber, cloud and data analytics, geospatial, analysis and operations and machine learning. The combined companies are expected to generate approximately $535 million in revenue on a pro-forma basis and more than $55 million in adjusted EBITDA in 2017 before synergies.


  • Provides New and Enhanced Access to Agencies within the IC:  The combination expands the company’s footprint into target agencies, including FBI, DHS and new areas within the DoD.  
  • Adds Significant Scale, Creating Unique, IC-Focused Provider:  The transaction will create a pure-play IC provider of scale with approximately 2,100 employees, of whom 80% hold Top Secret and above clearances. The scale of the combined companies will provide a more competitive cost model and drive additional growth. 
  • Adds New and Complementary Capabilities for IC Customers:  The combined companies offer an expanded portfolio with new and enhanced solutions for both KeyW and Sotera legacy customers. Sotera will add complementary capabilities to KeyW’s existing agile software and solution development, cyber security and data analytics—and new capabilities in advanced emerging technologies focused on machine learning and big data solutions. KeyW brings new and complementary capabilities to existing Sotera customers, including cyber operations and training, affordable Intelligence Surveillance and Reconnaissance solutions, sensor development, platform modification and end-to-end mission solutions. 
  • Provides Access to Large Portfolio of Prime Contracts and IDIQ Vehicles:  Sotera brings more than 12 prime IDIQ and GWAC contract vehicles, which will expand the combined company’s overall presence in the IC and DoD. The combined contract portfolio provides the opportunity to sell capabilities from each company to new and existing customers with an enhanced business development engine. 
  • Highly Achievable Cost Synergies: The transaction is expected to yield approximately $3.5 million of cost synergies within the fiscal year 2017 and approximately $7 million within 12-18 months. 
  • Enhanced Cash Flow Profile and Accretive Earnings Per Share (EPS): The transaction is expected to be immediately accretive to FY2017 adjusted EPS and GAAP EPS accretive in FY2018. The cash flow profile of the combined business will enable deleveraging immediately. The anticipated tax attributes will increase net cash flow through an expected reduction of cash tax expense.

In addition to funds provided by KeyW’s recently completed secondary common stock offering, further financing for the transaction was supported by a five year senior secured $135 million term loan and a $50 million revolving credit facility arranged by RBC Capital Markets.

The combined companies will have pro-forma debt to trailing 12-month adjusted EBITDA of approximately 4.4x. The merger structure is expected to preserve certain tax attributes of Sotera (subject to applicable U.S. Code 382 limitations on net operating loss carryforwards), providing tax benefits with an expected net present value of up to approximately $46 million. 

KeyW’s Bill Weber and Mike Alber will continue in their current respective roles as chief executive officer and chief financial officer. Additional leaders will be drawn from both companies and named as the integration progresses—and KeyW’s current board of directors will continue to provide executive oversight of the organization.

About KeyW
KeyW is an innovative national security solutions provider to the Intelligence, Cyber, and Counterterrorism communities. KeyW’s advanced technologies in cyber; intelligence, surveillance and reconnaissance; and analytics span the full spectrum of customer missions and enhanced capabilities. The company’s highly skilled workforce solves complex customer challenges such as preventing cyber threats, transforming data to actionable intelligence, and building and deploying sensor packages into any domain. For more information, please visit and follow KeyW on Twitter @KeyWCorp.

Forward-Looking Statements: Statements made in this press release that are not historical facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements containing the words “estimates,” “believes,” “anticipates,” “plans,” “expects,” ‘will,” “potential,” “opportunities,” and similar expressions. Our actual results, performance or achievements or industry results may differ materially from those expressed or implied in these forward-looking statements, including, but not limited to, express or implied statements concerning: our expectations regarding our future financial performance, including the potential impact of successful contract awards; our bid and proposal pipeline; our ability to achieve projected growth in certain of our business units and the expected timing of such growth; demand for our products, services and solutions serving the intelligence, cyber and counterterrorism communities; and performance of key contracts, including the timing of production related to certain of our contracts and product offerings. Factors that may cause our results to differ, potentially materially, from those expressed or implied in our forward-looking statements include, but are not limited to: risks to our business and financial results related to reductions and other spending constraints imposed on the U.S. Government, including as a result the Federal budget deficit and Federal government shut-downs; risks of adverse regulatory action or litigation; risks that changes, cutbacks or delays in spending by Intelligence Community (IC) customers, including the National Security Agency (NSA), the National Geospatial-Intelligence Agency (NGA), and other agencies within the IC, the Federal Bureau of Investigation, and the Department of Defense (DoD) may occur, which could cause delays or cancellations of key government contracts; risks of delays to or the cancellation of our projects as a result of protest actions submitted by our competitors; risks that changes may occur in Federal government (or other applicable) procurement laws, regulations, policies and budgets; risks related to changes in government and customer priorities and requirements (including cost-cutting initiatives, the potential deferral of awards, terminations or reduction of expenditures to respond to the priorities of Congress and the Administration; and those risk factors set forth in our Annual Report on Form 10-K, dated and filed March 16, 2018 with the Securities and Exchange Commission (SEC), and other filings that we make with the SEC from time to time. Due to such uncertainties and risks, investors are cautioned not to place undue reliance on such forward-looking statements. We are under no obligation to (and expressly disclaims any such obligation to) update or alter our forward-looking statements whether as a result of new information, future events or otherwise.

Media Contact:
Karen Coker
Director, Corporate Communications

Investor Contact:
Mark Zindler
Vice President, Investor Relations and Treasury