What is a Reverse Morris Trust transaction?

A Reverse Morris Trust transaction is a complex corporate restructuring that allows a company to spin off a business unit on a tax-advantaged basis. In this case, Lockheed Martin's IS&GS business would be transferred to a new entity, which then merges with the acquiring company (Leidos). Shareholders of Lockheed Martin would then typically receive shares in the merged entity.

What is the primary goal of this transaction for Lockheed Martin?

The primary goal is to separate Lockheed Martin's Information Systems & Global Solutions (IS&GS) business segment and merge it with Leidos. This strategic move is intended to allow Lockheed Martin to focus more intensely on its core aerospace and defense businesses and to streamline its overall corporate structure.

Will this transaction have tax implications for Lockheed Martin shareholders?

The filing indicates that the transaction is structured to be tax-free to Lockheed Martin and its shareholders. However, this is typically subject to certain conditions and tax rulings remaining in effect.

What is the role of Abacus Innovations Corporation?

Abacus Innovations Corporation is a wholly-owned subsidiary of Lockheed Martin that was specifically created to facilitate the proposed transaction. It will merge with a subsidiary of Leidos, ultimately becoming a wholly-owned subsidiary of Leidos as part of the Reverse Morris Trust structure.

LMT 8-K SEC Disclosure — Jul 11, 2016

Summary

Lockheed Martin Corporation (LMT) filed an 8-K on July 11, 2016, to announce a significant strategic move: the commencement of an exchange offer for its Information Systems & Global Solutions (IS&GS) business segment. This segment is slated to merge with Leidos Holdings, Inc. (Leidos) through a Reverse Morris Trust transaction. This complex transaction aims to separate the IS&GS business and combine it with Leidos, creating a new entity that will be publicly traded. Investors should note that this transaction is expected to be tax-free to Lockheed Martin and its shareholders, pending certain conditions. The primary goal is to streamline Lockheed Martin's portfolio, allowing it to focus on its core aerospace and defense businesses. The filing indicates that a wholly-owned subsidiary, Abacus Innovations Corporation, has been formed to facilitate the merger with a Leidos subsidiary. This strategic realignment could reshape the competitive landscape for both companies.

Key Highlights

1Lockheed Martin is initiating an exchange offer for its Information Systems & Global Solutions (IS&GS) business segment.
2The IS&GS business will merge with Leidos Holdings, Inc. (Leidos) via a Reverse Morris Trust transaction.
3A new, wholly-owned subsidiary, Abacus Innovations Corporation, was created to manage the transaction's structure.
4The transaction is structured to be a tax-free event for Lockheed Martin and its shareholders, subject to conditions.
5This move signifies a strategic separation of the IS&GS business to allow Lockheed Martin to focus on its core aerospace and defense operations.
6The filing includes a press release dated July 11, 2016, detailing the commencement of the exchange offer.

LOCKHEED MARTIN CORP 8-K Report, Corporate Update (Jul 11, 2016)

Summary

Key Highlights

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