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PE Firms Veritas Capital and Evergreen Coast Capital Acquire Cubic Corp For $2.8 Billion

Private equity firms Veritas Capital and Evergreen Coast Capital have acquired San Diego, California-based government IT contractor Cubic Corp. for $2.8 billion.

This is deal number 102 that ChannelE2E has covered so far in 2021. See all technology M&A deals for 2021 and 2020 listed here.

Cubic provides secure communication systems to the U.S. military and develops payment and IT systems for the transportation industry. The company is one of the oldest publicly traded companies in San Diego, according to the San Diego Union-Tribune.

The company supplies a variety of defense training technologies, but is best known for its Top Gun fighter pilot training system. Cubic has around 1,500 employees in San Diego and 6,000 around the world.

As part of the all-cash deal, Cubic shareholders will receive $70 in cash for each share of the company, which will become private after the deal closes. Employees and customers will remain unaffected by the transaction, according to all parties involved.

Evergreen Coast is affiliated with activist investor Elliott Management, which acquired 15 percent of Cubic’s stock in September in a bid to buy the company. In an attempt to fend off the takeover, Cubic adopted a poison-pill strategy, the Union-Tribune reported. The tactic is used to make acquisition targets appear less attractive.

Ultimately, the strategy was ineffective, and the Cubic board of directors announced it would unanimously support the acquisition. Elliott Management said it would vote its shares in favor of the acquisition.

PE Acquisition of Cubic: Executive Insight

Bradley H. Feldmann, Chairman, President, and CEO, Cubic Corporation
Bradley H. Feldmann, chairman, president and CEO, Cubic Corporation
Ramzi Musallam, CEO and Managing Partner, Veritas

Bradley H. Feldmann, chairman, president and chief executive officer of Cubic Corporation, commented:

“This transaction is in the best interests of our shareholders and provides them with a significant premium and liquidity – while accelerating future growth to the benefit of our employees and customers. Our success in attracting a premier, deeply experienced partner and securing a transaction at this premium reflects the positive momentum of our business. Although last fiscal year brought unprecedented challenges, Cubic was able to build on our strengths, protect our people, serve our customers and deliver a value-maximizing deal for our shareholders. We look forward to partnering with Veritas and remain grateful to our customers for their trust and to our fellow CUBES for their unwavering commitment to delivering innovative, mission-critical solutions.”

Ramzi Musallam, CEO and managing partner of Veritas, said:

“Cubic has an unparalleled history of delivering innovative technology-based solutions to address the mission-critical needs of the global transportation and defense markets. We look forward to leveraging our expertise in the government technology market – a key focus of Veritas since our inception – in partnership with the team at Cubic to accelerate product development and drive growth as Cubic continues to improve the quality of global transportation systems and to deliver innovative defense solutions.”

Veritas’ Government IT Plays

Veritas has a history of spending large sums to acquire government IT businesses. Less than a month ago, the firm backed Peraton in its $7.1 billion acquisition of Perspecta.

In December 2020, the firm acquired Northrop Grumman’s federal IT and mission support business for $3.4 billion in cash, merging the division into Peraton. In March 2020, DXC Technology sold its U.S. state and local Health and Human Services business to Veritas Capital for $5.0 billion.

Veritas Capital is not to be confused with Veritas Technologies, a storage and data protection company backed by private equity firm The Carlyle Group.

Meanwhile, M&A activity in the government IT services market remains strong, according to ChannelE2E’s ongoing federal, state, and local government IT coverage.