KeyW signed an agreement to acquire Sotera Defense Solutions in an all-cash transaction valued at approximately $235 million, inclusive of an expected $46 million net present value of acquired tax benefits.

This transaction will augment the strengths of each company to create a leading pure-play products and solutions provider to the Intelligence Community and related customers with expected combined pro-forma revenue of approximately $535 million in 2017.

KeyW intends to fund the transaction with proceeds from a new secured credit facility arranged by RBC Capital Markets and cash on hand. The combined company will have pro forma debt to trailing 12-month adjusted EBITDA (as defined for credit facility purposes) of approximately 4.4x. The merger structure is expected to preserve certain tax attributes (subject to applicable U.S. Code 382 limitations on net operating loss carryforwards), providing tax benefits with an expected net present value of approximately $46 million.

Sotera will become a wholly-owned subsidiary of The KeyW Corporation following the transaction. Sotera is privately owned by funds managed by Ares Management.

“Both KeyW and Sotera deliver advanced technologies to the Intelligence, Cyber and Counterterrorism communities to secure our nation and its allies,” said Bill Weber, KeyW’s chief executive officer. “We share a common goal to expand our footprints among IC customers and leverage unique capabilities to significantly benefit existing and new customers, as well as add scale. This combination will provide customers access to these high-value solutions while also creating new opportunities for our employees and driving additional value for shareholders.”

RBC Capital Markets is serving as financial advisor to KeyW, and Morrison & Foerster is serving as legal advisors. Guggenheim Securities is also serving as a financial advisor to KeyW, and Holland & Knight is serving as securities counsel to KeyW. Macquarie Capital and Sagent Advisors are serving as financial advisors to Ares Management and Sotera, with Proskauer Rose serving as legal counsel to Sotera.