Nortel to buy IT services firm for $448 million

Nortel Networks Inc., the U.S. subsidiary of Canada’s Nortel Networks Corp., plans to buy government IT services provider PEC Solutions Inc. for about US$448 million, Nortel announced Tuesday.

Nortel plans to create a new U.S. entity, Nortel PEC Solutions, that will provide IT services for federal, state and local government customers. The acquisition will help it compete more effectively for government business, the company said. Specifically, Nortel hopes to capitalize on opportunities in national security, civil government and new types of law enforcement systems, it said.

Nortel Networks Inc. will pay $448 million, net of cash acquired, through a cash tender offer of $15.50 per share for all of PEC’s outstanding shares. It expects the acquisition to have no impact on its earnings per share in 2005 and to be accretive thereafter, it said.

PEC is based in Fairfax, Virginia. It was founded in 1985 and has about 1,700 employees. Its customers include the U.S. Secret Service, the Department of Justice, the Federal Bureau of Investigation and the U.S. Postal Service, Nortel said.

The acquisition is expected to be completed in June 2005, pending regulatory approvals and the tendering of sufficient PEC shares.

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