McMillen and the other officers, directors and advisors of Fortress America can anticipate a big payout if the company succeeds.
On March 9, six key players bought a total of 1.75 million shares of stock in the company for 14 cents a share. Among the buyers were McMillen's Washington Capital Advisors, Weiss, Mitchell, Hutchinson and Nickles. The Paladin Homeland Security Fund, a Washington venture capital and buyout fund established last year by former Democratic Party operative Michael R. Steed, bought about 50,000 shares.
C. Thomas McMillen founded Fortress America Acquisition Corp., which has registered with the SEC to raise $42 million.
(John Duricka -- AP)
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The 14-cent shares bought by Paladin and by Fortress America's organizers are being held in escrow but can be sold at the market price after three years, or whenever the company is sold or dissolved.
In its IPO, Fortress America is offering units, at $6 each, that provide one share of common stock plus warrants to buy two shares at $5 each. The warrants can't be exercised until the company merges with an operating company.
Mercator Partners Plans IPO
Fortress America isn't the only special purpose acquisition company in the Washington area looking to raise money in the public markets. Mercator Partners Acquisition Corp. is planning a $51.7 million IPO. Reston-based Mercator plans to use the money to buy companies in communications industries such as local and long-distance telephone, broadband, satellite, cable, and digital radio.
Officials at Mercator declined to comment.
H. Brian Thompson, 65, a veteran telecommunications industry executive in the Washington area, is Mercator's chairman and chief executive. Rhodric C. Hackman, 57, is president; Lior Samuelson, 55, is executive vice president; and David Ballarini, 41, is chief financial officer. All three are partners at Mercator Capital, a privately owned Reston investment bank specializing in mergers and acquisitions of telecommunications, defense and information technology companies.
The organizers and Mercator Capital put up $247,500 to buy about 5 million stock warrants for 5 cents a share. The warrants entitle the organizers to buy common stock at $5 a share.
Mercator, like Fortress, is offering units in its IPO that include both common stock and warrants.
Morgan E. O'Brien, vice chairman of Nextel Communications Inc., and Alex Mandl, former chief executive of Teligent, are special advisers to Mercator Partners Acquisition Corp.
The Fortress America and Mercator deals have some elements in common. None of the executives of either company will make a salary until a merger is done, though in each case the companies are renting office space (at no more than $7,500 a month) from their organizers.
For Mercator, the IPO proceeds must be returned to investors if the company doesn't accomplish a merger or sign a letter of intent within a year. For Fortress America, the money will be returned if a deal is not signed within 18 months.
Terence O'Hara's e-mail address is oharat@washpost.com.
