Exelis Approves Spinoff Of Vectrus; Distribution Set For End Of September

Exelis’ (XLS) board of directors recently approved the spinoff of its mission systems business, Vectrus and rumor is that Exelis’s parent company, ITT (ITT), is excited about becoming a grandparent despite the rather creative name choice. The spinoff will take place on September 27th to shareholders as of September 18th and the new company will trade on the NYSE under the ticker ‘VEC’. Shareholders will receive one share of VEC for every 18 XLS shares owned so there could be some forced selling as a result of the odd ratio creating a bunch of small positions. A when-issued market for the companies is expected to appear ‘on or about’ September 16th.

Vectrus will raise ~$140m of debt as part of the transaction in order to finance a $120m cash payment to its parent company for giving it life. The company will have a brand new management team including Ken Hunzeker, currently EVP and President of the Missions System division, who will become CEO. Theodore Wright will become COO and the rest of the management team and board of directors can be found in the press release linked to above.

Barron’s had a piece back in May suggesting that the parent company had a lot of room to run so this situation is certainly worth examining in more depth. The company will be hosting an investor day about Vectrus on September 19th which should provide additional information and in the meantime, feel free to check out the latest Form 10 and all of our previous coverage on the situation.

Disclosure: Author holds no position in any stock mentioned.