May 5, 2014

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Article

ATK Merges with Orbital Sciences Corporation

Press Release

May 5, 2014

Alliant Techsystems Inc. (ATK), has entered into a definitive agreement with Orbital Sciences Corporation, which will combine the company’s Aerospace and Defense (A&D) Groups to create a $4.5 billion, 13,000-person space, defense and aviation systems developer and manufacturer. ATK has Utah sites in Promontory, Clearfield, Magna, Logan and Orem.

The new company, to be called Orbital ATK, Inc., will serve U.S. and international customers with positions in the markets for space launch vehicles and propulsion systems, tactical missiles and defense electronics, satellites and space systems, armament systems and ammunition, and commercial and military aircraft structures and related components. As part of the transaction, ATK will spin off its Sporting Group, which focuses on commercial sporting equipment, to its shareholders.

The tax-free stock-for-stock merger-of-equals transaction, valued at approximately $5 billion based on Orbital’s closing stock price April 28, will combine Orbital’s small- and medium-class satellite and launch vehicle product lines with ATK A&D’s rocket propulsion, composite structures and space power systems to produce capable and affordable space and missile defense products.

Orbital ATK will draw leaders from both organizations for key governance and management positions. A 16-member board of directors will be led by chairman Gen. Ronald R. Fogleman (U.S. Air Force, ret.) and will include seven directors from ATK’s board and nine directors from Orbital’s board.

David W. Thompson, Orbital’s president and chief executive officer, will be president and CEO of the new company. Blake E. Larson, president of ATK’s Aerospace Group, will serve as its chief operating officer; and Garrett E. Pierce, Orbital’s chief financial officer, will hold the same position in the new company. Other key management positions will be determined prior to the transaction’s closing.

“The proposed merger will generate cost and revenue synergies and create a more streamlined and competitive operator,” said Mark W. DeYoung, ATK’s CEO. “We see opportunities to build on ATK’s success in Aerospace and Defense through a combination with Orbital’s proven track record in creating new launch vehicles, satellites and other advanced space technologies.”

Orbital ATK expects to employ about 13,000 people, including more than 4,300 engineers and scientists and 7,400 production and operations specialists, at engineering centers, research laboratories, manufacturing facilities, and test and launch sites in 17 states. The combined company will be headquartered at Orbital’s existing Dulles, Virginia campus, with major employee sites in Utah, Missouri, Virginia, Arizona, Maryland, West Virginia, California and Minnesota.

Based on 2013 financial results, the new company would have combined annual revenues of about $4.5 billion, EBITDA over $575 million and total contract backlog more than $11 billion. Net debt of Orbital ATK at closing is expected to be about $1.4 billion, after taking into account combined cash balances of approximately $300 million. Annual revenue and cost synergies of $220-300 million are expected by 2016, consisting of $150-200 million of incremental annual revenue and $70-100 million of annual cost reductions.

In the merger, ATK shareholders will own approximately 53.8 percent of the equity of the combined company and Orbital shareholders will own approximately 46.2 percent. The combination, which has been unanimously approved by the Boards of both companies, is to be effected in a tax-free “Morris Trust” transaction structure, with a spin-off of ATK’s Sporting Group to its shareholders immediately prior to the merger. 

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