Science Applications Files Plan for IPO

Science Applications International Corp., the largest employee-owned research and engineering firm in the country, plans to make an initial public offering of stock worth up to $1.73 billion, the company said in a government filing Thursday.

San Diego-based Science Applications did not disclose the number of shares it will offer or their price.

“The principal purpose of the initial public offering is to better enable SAIC to use its cash and cash flows from operations to fund organic growth and growth through acquisitions, as well as to provide SAIC with publicly traded stock that it can use for future acquisitions,” the company said in a statement.

“Creating a publicly traded stock also eliminates the need for SAIC to use its cash to provide liquidity to its stockholders through its internal stock market,” SAIC said.

The company -- which provides scientific, engineering, systems integration and technical services to the U.S. military and government agencies -- said in a preliminary prospectus filed with the Securities and Exchange Commission that Morgan Stanley and Bear Stearns & Co. would underwrite the offering.

The company also filed a proxy statement Thursday for a proposed capital restructuring in which Science Applications would form a new parent company, SAIC Inc., in a transaction that would close shortly before the IPO.

The company said in a statement that it expected the IPO to commence in early 2006.

For its fiscal first quarter ended April 30, the company earned $585 million on $1.85 billion in revenue. For the year-earlier period, it earned $89 million on $1.71 billion in revenue. The U.S. government is its largest customer, representing 86% of its total consolidated revenue in fiscal 2005.

The company said it would use substantially all of the net proceeds from the offering to pay a special dividend to its Class A preferred stockholders.

It said the offering would better enable it to use its cash to fund growth, rather than to provide liquidity to its shareholders, and provide it with publicly traded stock that could be used for acquisitions.

Science Applications had $3.19 billion in cash, cash equivalents and short-term investments as of April 30, the filing said.

According to the filing, Chairman and Chief Executive K.C. Dahlberg earned $2.5 million in salary and bonuses in fiscal 2005. Dahlberg, who joined the company in 2003, earned $1.26 million in fiscal 2004 for a partial year.

The company said it would apply to list SAIC Inc.’s stock on the New York Stock Exchange under the symbol SAI.

Dow Jones/Associated Press and Reuters were used in compiling this report.