SAIC Shares Rise 21% in Trading Debut

Shares of San Diego-based defense services contractor SAIC added more than 21% on Friday in the company’s trading debut.

SAIC, one of the nation’s largest employee-owned companies, priced its 75-million-share initial public offering at $15 a share, for a total value of $1.125 billion. Its underwriters, Morgan Stanley and Bear Stearns Cos., have the option to buy an additional 11.25 million shares.

The stock, listed on the New York Stock Exchange under the symbol SAI, closed at $18.18 after earlier reaching $18.39.

The company, formerly known as Science Applications International Corp., also said it was paying a $2.45-billion special dividend to its employee owners, funded largely by cash on hand before the offering. The IPO shares are not eligible for the dividend.

SAIC has said cash remaining after the dividend payment and borrowing capacity under its credit facility “will be used for general corporate purposes, including working capital, capital spending, internal growth initiatives and possible investments in, or acquisitions of, complementary businesses, services or technologies,” according to a filing last week with the Securities and Exchange Commission.

The company has been profitable each of its 37 years and performs some of the U.S. government’s most sensitive security work. Its competitors represent the Pentagon’s top contractors, including Lockheed Martin Corp., Boeing Co. and Raytheon Co.

“They’re right up there in terms of the competitive landscape and from a strategic standpoint, obviously they have a solid position,” said Peter Arment, an analyst at JSA Research Inc. in Newport, R.I. Arment said he expected SAIC shares to be about $20 by year’s end.

SAIC has been employee-owned since it was founded in 1969. Employees will keep a class of preferred stock with 10 votes a share, compared with one vote a share for the public stock.

Chief Executive Kenneth Dahlberg, who owns 335,927 shares and joined the company in 2003 from General Dynamics Corp., has said SAIC was going public because it wanted to stop bleeding cash to buy stock.

SAIC spent $2.4 billion in the last five years to purchase stock from employees, who can buy and sell shares once every three months at a price determined by a company auditor.