Exelis Board Approves Spin-off Of Mission Systems Division As Vectrus

(RTTNews) - Exelis, Inc. (XLS) said Monday that its board has approved the planned spin-off of its mission systems division as an independent company called Vectrus, Inc. The move will see Exelis being split into two separately separate publicly traded companies.

"The decision to create two well-capitalized independent companies underscores Exelis' commitment to ensuring that our strategic priorities are aligned with the best interests of our shareholders. Each company will have a solid strategy and strong leadership and be better equipped to serve the needs of its global customers. We are excited about the future for both Exelis and Vectrus," said Exelis President and CEO David Melcher said in a statement.

The Exelis board approved the distribution of all of the outstanding shares of Vectrus to its shareholders, who will own 100 percent of the common shares of Vectrus. The company confirmed that the distribution will not be taxable to holders of shares of Exelis common stock.

The company said each Exelis shareholder will receive one share of Vectrus common stock for every 18 shares of Exelis common stock held as of the close of business on September 18, the record date for the distribution.

The company is expected to distribute about 10 million shares of Vectrus common stock to Exelis shareholders, based on the current 188 million shares of Exelis common stock outstanding and the one-to-eighteen distribution ratio for the spin-off.

The company noted that the distribution does not require shareholder approval, nor is any shareholder action or payment necessary to receive shares through the distribution of Vectrus common stock in the spin-off.

The distribution date will be September 27 and Vectrus shares will begin "regular way" trading on the New York Stock Exchange under the ticker symbol "VEC" on September 29. However, Vectrus will begin trading on a "when issued" basis under the symbol "VEC WI" on or about September 16. Meanwhile, Exelis shares will continue to trade under the ticker symbol "XLS."

In December 2013, McLean, Virginia-based Exelis initially announced the planned spin-off of the division which is currently part of its information and technical services segment.

Vectrus is a blended name derived from the words Vector and Trust. As a pure-play services provider, Vectrus will capitalize on more than 50 years' experience in the services market.

Following completion of the spin-off, Exelis will focus on its four strategic growth platforms: Critical Networks, ISR & Analytics, Electronic Warfare, and Aerostructures, as well as continue to capitalize on its mature business areas of networked communications and night vision.

In connection with the spin-off, Vectrus will incur about $140 million of debt financing. The proceeds of the debt financing will be used to fund a cash distribution to a subsidiary of Exelis that is expected to be about $120 million, with an additional amount expected to be paid following the distribution through a working capital adjustment.

Exelis also named the Vectrus management & board of directors. The nine member board of Vectrus will be led by Louis Giuliano as non-executive chairman. The management team will be led by Kenneth Hunzeker as president and CEO. He was most recently the executive vice president and president of Mission Systems.

The company noted that Theodore Wright will be the executive vice president and chief operating officer as well as Matthew Klein will be the senior vice president and chief financial officer.

In Monday's regular trading session, XLS is currently trading at $17.85, up $0.39 or 2.22% on a volume of 0.10 million shares.