(Editor's note: This article has been updated to make clear Veritas is acquiring the unit.)
Northrop Grumman said today it has agreed to sell its federal IT and mission support services business to private equity-firm Veritas Capital, which owns Peraton, for $3.4 billion in cash.
The deal is slated to close in the first half of next year, and Northrop said it would use the sale proceeds for share repurchases, to offset dilution and for debt retirement.
The business is slated to generate about $2.3 billion in sales in 2020.
Once the deal closes, Veritas will combine the Northrop business with Peraton, the former Harris government IT services business, which it bought in 2017. Stu Shea, Peraton's chief executive, will lead the combined company, according to Veritas.
Northrop becomes the latest large contractor to divest its IT services business. In 2016, both Lockheed Martin and L3 Technologies divested their IT services businesses.
However, some have doubled down. General Dynamics, for instance, in 2018 picked up CSRA to grow its footprint in the IT services market.
Still, Northrop has resisted selling its IT services work. In 2016, for instance, Wes Bush, the contractor's chief executive at the time, told analysts Northrop was seeking to move the business away from commodity services -- but wasn't planning to divest it.
"We always look at the full range of portfolio options, but I will tell you in this case what we see is the redeployment of people," he said. "My general bias in looking at a business like [technology services], where we do have such an amazing group of employees, is just to more effectively leverage that capability."