Saying the "new ownership structure unlocks new markets and growth opportunities," private equity firm Madison Dearborn Partners and CoVant announced completion of their cash acquisition of LGS Innovations from Alcatel-Lucent (NYSE:ALU).
The deal, which is worth up to $200 million, not only opens doors to LGS but gives a financial boost to Alcatel-Lucent, which said the asset divestiture forms part of its commitment within The Shift Plan to generate at least 1 billion euros (almost $1.4 billion) through selective asset sales by the end of 2015.
LGS provides secure wireless and wired networking, satellite communications, VoIP, optical routers and other solutions for the U.S. national security, defense and advanced research communities. Among other things, LGS markets 4G wireless communications systems for the public-safety, battlefield, emergency and first-responder communities. Other LGS customers include state and local governments, foreign governments and commercial enterprises.
The 700-employee company was formed in 2006 to bring together the federally focused portions of parent companies Alcatel and Lucent, which merged that year. LGS sought a U.S.-based buyer because its status as a "foreign-owned company" meant it was "reaching some natural barriers," CEO Kevin Kelly, told the Washington Post in January.
Freed from French ownership, LGS is expected to have an easier time of securing contracts with the U.S. government, with which it has partnered for 60 years. The change could open up, for example, opportunities with the First Responders Networks Authority (FirstNet), which is building the 700 MHz LTE-based nationwide public-safety broadband network.
"The company is uniquely positioned for new growth channels as it can now pursue markets and customers previously closed to them as a subsidiary of a non-U.S. company," said Joseph Kampf, CEO of CoVant, which is a holding company focused on acquiring and growing companies in the U.S. federal government technology solutions marketplace.
Madison Dearborn and CoVant paid Alcatel-Lucent 50 percent of a maximum $200 million acquisition price for LGS at closing. And additional 50 percent "will form a subsequent variable component to be determined on LGS' results from operations during the 2014 fiscal year," Madison Dearborn said.
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