U.S. govt contractor Engility to buy TASC for about $1.1 billion

(Reuters) - U.S. government contractor Engility Holdings Inc, said it would buy privately held TASC, a provider of professional services to government agencies, for about $1.1 billion (0.68 billion pounds), including debt.

Engility's shares rose 4.2 percent in extended trading on Tuesday.

The deal comes at a time when the U.S. government is cutting spending, particularly on defence and security. These cuts have hit professional services providers that are primarily dependant on business from the government.

Engility, which provides skilled personnel to U.S. departments of defence and justice among others, said the combined company is expected to generate revenue of about $2.5 billion this year.

TASC, whose clients include U.S. military and homeland security agencies, is controlled by affiliates of Kohlberg Kravis Roberts & Co and General Atlantic LLC.

"TASC has a substantial presence in the Intelligence Community, Space and other markets in which Engility is underrepresented," Engility said in a statement.

TASC's stockholders will get about 18.9 million shares of Engility, giving them a 51 percent stake in the combined company on a pro-forma basis.

Shareholders of Engility, which was spun out of L-3 Communications Holdings Inc in 2012, will receive a special cash dividend of about $11.40 per share.

The deal value of $1.1 billion includes about $613 million in debt and the net present value of TASC’s tax assets.

The all-stock deal, which will give 850 contracts to Engility, is expected to add to Engility's earnings in 2016 and close in the first quarter of 2015.

Engility said the combined company is expected to generate about $35 million in cost savings by the end of 2016.

(Reporting by Ankit Ajmera and Tanvi Mehta in Bangalore; Editing by Saumyadeb Chakrabarty)