What is the final exchange ratio, and what does it mean for shareholders?

The final exchange ratio is 8.2136 shares of Abacus Innovations Corporation (the entity holding the IS&GS business) for each share of Lockheed Martin common stock accepted in the exchange offer. This means shareholders who participate in the exchange offer will receive approximately 8.2136 shares of the spun-off IS&GS business (which will then merge with Leidos) for every share of Lockheed Martin they exchange.

What is happening to the IS&GS business?

The IS&GS business is being separated from Lockheed Martin. It will be transferred to a newly formed entity called Abacus Innovations Corporation. Subsequently, Abacus Innovations Corporation will merge with Leidos Holdings, Inc., and become a wholly-owned subsidiary of Leidos.

What is a Reverse Morris Trust transaction?

A Reverse Morris Trust transaction is a tax-efficient method for a company to spin off a business unit. Typically, the company creates a new entity for the business to be spun off, transfers the business to it, and then merges that new entity with a third-party company. This structure generally allows the separation and merger to occur on a tax-deferred basis for the shareholders involved in the initial exchange.

LMT 8-K SEC Disclosure — Aug 12, 2016

Q: What is the primary purpose of this 8-K filing?

The primary purpose of this 8-K filing is to announce the final exchange ratio for Lockheed Martin's exchange offer related to the separation of its Information Systems & Global Solutions (IS&GS) business as part of a Reverse Morris Trust transaction with Leidos Holdings, Inc.

Summary

Lockheed Martin Corporation (LMT) filed an 8-K on August 12, 2016, to announce the final exchange ratio for its previously announced exchange offer related to the separation of its Information Systems & Global Solutions (IS&GS) business. This separation is part of a Reverse Morris Trust transaction where the IS&GS business will merge with Leidos Holdings, Inc. The key takeaway for investors is the finalization of the exchange ratio, set at 8.2136 shares of Abacus Innovations Corporation (Abacus) for each share of Lockheed Martin common stock tendered and accepted. Abacus is the entity that will house the IS&GS business before its merger with Leidos. This sets the terms for shareholders participating in the exchange offer, allowing them to swap their LMT shares for shares in the spun-off entity, which will subsequently become part of Leidos.

Key Highlights

1Lockheed Martin announced the final exchange ratio for its IS&GS business separation. The ratio is 8.2136 shares of Abacus Innovations Corporation for each Lockheed Martin share accepted in the exchange offer.
2The transaction involves separating the Information Systems & Global Solutions (IS&GS) business into a new entity, Abacus Innovations Corporation.
3Abacus Innovations Corporation will then merge with Leidos Holdings, Inc., making Abacus a wholly-owned subsidiary of Leidos.
4This is structured as a Reverse Morris Trust transaction.
5The final exchange ratio matches the upper limit previously described in the Prospectus dated July 11, 2016.
6The filing includes a press release dated August 12, 2016, which details this announcement.

LOCKHEED MARTIN CORP 8-K Report, Corporate Update (Aug 12, 2016)

Summary

Key Highlights

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