Enhancing its National Security Solutions Portfolio

• Enhances technical capabilities and positions HII in high-growth mission-critical security solutions: C5ISR, advanced military training and simulation, artificial intelligence, big data and electronic warfare
• Provides high-end solutions critical to multi-domain distributed operations, well aligned with future U.S. Navy and Department of Defense modernization and readiness priorities
• Accelerates Technical Solutions growth rate to 7% to 9% CAGR through 2024
• Expected to be significantly cash flow accretive in 2022 and GAAP EPS accretive in 2023
• Conference call scheduled for 9:00 a.m. Eastern Time today to discuss transaction

NEWPORT NEWS, Va., (July 06, 2021) — Huntington Ingalls Industries (NYSE:HII) announced today that it has entered into a definitive agreement to acquire Alion Science and Technology for $1.65 billion in cash from Veritas Capital, subject to customary adjustments. Alion is a high value-added, technology-driven solutions provider for the global defense marketplace. The transaction represents an enterprise value-to-expected 2022 adjusted EBITDA¹ multiple of approximately 12.2x. Alion will become part of Huntington Ingalls Industries’ Technical Solutions division. The transaction is expected to close in the second half of 2021, subject to customary closing conditions.

Alion provides advanced engineering and R&D services in the areas of ISR, military training and simulation, cyber, data analytics and other next-generation technology based solutions to the DOD and intelligence community customers, with the U.S. Navy representing about one third of current annual revenues. Alion is poised for continued strong growth with over $3 billion in backlog today, with more than $5 billion in estimated contract value and a robust opportunity pipeline. Alion has more than 3,200 employees with over 80% of employees maintaining security clearances.

(See the presentation available on the HII investor relations website for additional Alion background and transaction details.)

“We established the Technical Solutions division in 2016 with a vision and strategy focused on partnering with our customers to solve their most pressing challenges,” said Mike Petters, HII’s president and CEO. “Today’s announcement, coupled with our previous investments in leading edge technologies, such as cybersecurity and autonomous systems, reflects our commitment to stay on the cutting edge of critical, high-growth national security solutions and generate significant long-term value for our shareholders.”

“The combination of Alion and our Technical Solutions business represents a significant value creation opportunity that broadens our capabilities and customer access in our target markets,” said Andy Green, HII executive vice president and president of Technical Solutions. “The experienced Alion team and the highly complementary solutions and products they provide are consistent with the strategic vision we have articulated for the Technical Solutions business, and we are excited about the significant growth potential this combination represents.”

Compelling Strategic Fit

• Highly complementary capabilities and customer access in priority growth markets aligned with future U.S. Navy and DOD customers. Alion’s strengths in enabling and supporting Navy simulation and training are closely aligned with existing Huntington Ingalls Industries capabilities and customers. Alion offers leading ISR support and integrated C5 solutions, solidifying key capabilities and talent when combined with HII’s existing C5ISR offerings.
• Access to key contracts and leading edge technology development areas of cyber, data analytics, and electronic warfare. Alion expands capabilities, customer reach and addressable market. With a cutting-edge global research footprint, Alion’s innovative technologies and talent are crucial to evolving customer priorities.
• Acquisition creates a $2.6B+ revenue products and solutions business. It creates substantial revenue and value creation opportunities over the long-term, further positioning Technical Solutions as a growth driver for Huntington Ingalls Industries.

Strong Projected Financial Opportunities

• Transaction is expected to be significantly cash flow accretive in fiscal 2022 and GAAP EPS accretive in fiscal 2023
• Expands Technical Solutions’ projected pro forma 2021 to 2024 revenue CAGR to 7% to 9%
• Expect Alion to contribute fiscal 2022 revenue of approximately $1.6 billion and Adjusted EBITDA¹ of approximately $135 million
• Enhances overall HII 2022-2024 FCF¹ guidance by ~$200 million
• Significant potential incremental long-term revenue synergies identified, particularly in the ISR and advanced military training and simulation markets

Transaction Details

• $1.65 billion purchase price
• Enterprise value-to-expected 2022 adjusted EBITDA¹ multiple of approximately 12.2x
• Expect approximately $25 million of one-time transaction and financing related expenses in 2021
• Expect to fund the purchase price through a combination of new senior notes and new term loan facility

Consistent Capital Allocation Priorities

• Generational investment in shipyards concluding in 2021 as planned
• Expect continued annual dividend growth
• Utilize excess cash for strategic opportunities and share repurchases
• Deploy aggressive debt reduction approach in order to return to investment grade metrics

Approvals and Timing

• The transaction is expected to close in the second half of 2021, subject to the satisfaction of customary closing conditions, including regulatory approvals

Advisors

• Credit Suisse acted as financial advisor and Jones Day served as legal counsel to Huntington Ingalls Industries
• Renaissance Strategic Advisors and Arena Strategic Advisors acted as advisors to Huntington Ingalls Industries
• Macquarie Capital acted as financial advisor and Milbank served as legal counsel to Alion Science and Technology