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(Adds share prices, background on CACI, NSS business)
By Mike Stone and Greg Roumeliotis
Dec 4 (Reuters) - L-3 Communications Holdings Inc isin exclusive talks to sell National Security Solutions (NSS),its government services division, to smaller defense contractorCACI International Inc for around $550 million, peoplefamiliar with the matter said on Friday.
If it strikes a deal, L-3 would be the latest militarytechnology company to shed its less-profitable governmentconsultancy operations in response to lower U.S. militaryspending.
A deal would help L-3, the Pentagon's No. 7 prime contractorlast year, as it looks to move away from low-margin businessesand focus on the communications and defense electronics markets.
A deal could be announced as early as next week, assumingnegotiations are concluded successfully, said the people, whoasked not to be identified because the negotiations areconfidential.
L-3 declined comment. CACI did not immediately respond torequests for comment.
Shares of L-3 closed up 2.7 percent on Friday at $124.01,while CACI shares rose 1.2 percent to $101.64.
NSS sells a wide range of services to businesses, governmentand intelligence agencies. Recently, NSS was awarded a contractto provide comprehensive training to Royal Saudi Air Forceoperations personnel.
Based in Arlington, Virginia, CACI sells informationservices to national security agencies, the military, and othergovernment departments. It has a market value of about $2.4billion.
Chris Kubasik, who was previously a president and chiefoperating officer of Lockheed Martin Corp, joined L-3 aspresident and chief operating officer in late October.
A successful divestiture of the NSS business would buck atrend of failed sales of similar units, such as BAE SystemsPlc's attempt to sell its services unit, which wascalled off after a long effort.
Other large defense contractors have also soured on thestruggling government services sector. Lockheed Martin,the Pentagon's No. 1 supplier, said earlier this year that itplans to sell or spin off information technology and servicesbusinesses that generate $6 billion in annual revenue.
CACI is vying for the Lockheed assets and has discussed aso-called Reverse Morris Trust deal, which would avoid a heavytax bill, sources familiar with the matter said earlier thisweek. CACI faces competition in that auction from LeidosHoldings Inc. (Reporting by Mike Stone in Washington and Greg Roumeliotis inNew York; Additional reporting by Andrea Shalal in Washington;Editing by Steve Orlofsky and Bill Rigby)