Huntington Ingalls Looking to Diversify with Bid for Services Company Camber, Sources Say

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October 21, 2016

A large section of the future John F. Kennedy (CVN 79) is lifted into place at Huntington Ingalls. Photo credit: Huntington Ingalls

ReutersBy Mike Stone

Oct 21 (Reuters) – Huntington Ingalls Industries Inc is in talks to buy government services contractor Camber Corp for nearly $400 million as the U.S.’s largest military shipbuilder diversifies, people familiar with the situation said.

Expanding its government services and contracting business could help Huntington grow outside of shipbuilding and help the company invest in a potential growth engine. The move coincides with larger defense contractors, such as Lockheed Martin Corp , having exited or shrunk their services businesses.

Huntington’s CEO Mike Peters said on the company’s Aug. 4 earnings call that he wanted to “grow our services business in support of the Navy and the Department of Energy.”

A deal for Camber, which was bought by private equity firm New Mountain Capital LLC in 2008 for an undisclosed sum, would follow a months-long competitive sales process for the company, the people said. They said that the talks could still fall apart.

They asked not to be identified because they were not authorized to speak about the talks.

Representatives for Newport News, Virginia-based Huntington Ingalls and New Mountain declined to comment. Huntsville, Alabama-based Camber did not immediately respond to a request for comment.

Camber provides IT, consulting and training services to the U.S. government, including the U.S. Postal Service, the Department of Defense and intelligence agencies. Camber has worked with the U.S. Navy on projects involving sensors and simulation and currently has training contracts.

Huntington Ingalls is the designer, builder and refueler of nuclear powered aircraft carriers, a builder of amphibious assault and expeditionary warfare ships for the U.S. Navy and the sole builder of National Security Cutters (NSCs) for the U.S. Coast Guard.

Huntington Ingalls was spun off from defense contractor Northrop Grumman Corp in 2011. In recent years it has seen cash flow increase and has grown its dividend as a way of sharing its profits with investors.

On its most recent quarterly earnings call, the shipbuilder with a $7 billion market capitalization said it had $852 million in cash on hand after it spent the quarter buying back about 239,000 shares at a cost of $36 million and paying dividends of $0.50 per share or $24 million, to shareholders.

Huntington plans to announce its third quarter earnings on Nov. 3. (Reporting by Mike Stone in Washington; editing by Grant McCool)

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