A newly formed investment group led by Jorge Carnicero, chairman of McLean government contractor DynCorp, yesterday offered $270 million, or $24 a share, for the firm's outstanding stock in a move to take the company private.
In addition to Carnicero, who cofounded DynCorp's predecessor 31 years ago, the investment group includes Eli S. Jacobs, a wealthy New York investor, and some members of the company's senior management. Carcinero and Jacobs are the majority owners of the group, called CJM Partners Inc.
In a statement yesterday, DynCorp said its board of directors has established a special committee of independent directors to evaluate the proposal. The committee has retained Dillon Read & Co. as its independent financial adviser.
The prospect of a leveraged buyout of DynCorp first arose earlier this month when it was disclosed that Carnicero and "other partners" were exploring such a move. One analyst said yesterday that while the offer itself was not a surprise, the $24-a-share price seemed unusually high given DynCorp.'s relatively flat earnings and ongoing legal troubles.
"This is a great deal for the shareholders," said Gerald Supple, an analyst who follows DynCorp stock at Wheat First Securities in Richmond. "They should take the money and run."
Supple also noted that it was likely the deal would be financed through low-rated, high-yield securities known as junk bonds. The company said that CJM Partners had engaged Drexel Burham Lambert Inc., which is noted for marketing junk bonds, to act as its financial adviser and provide the financing for the acquisition.
One major question mark hanging over the acquisition is Victor Posner, the prominent Miami investor, who disclosed that he had purchased 8.7 percent of DynCorp stock in an Aug. 28 filing with the Securities and Exchange Commission. Posner did not respond to a request for comment yesterday.
In trading on the New York Stock Exchange yesterday, DynCorp closed at $24.37 1/2, up 62 1/2 cents. On Sept. 1, the day Carnicero first announced his intention of buying the company, the stock was selling at less than $16 a share.
Dyncorp, which has more than 15,000 employes and had revenue of $749.1 million last year, was ranked as the Washington area's 13th-largest publicly owned company in The Washington Post's annual survey of the region's top 100 public companies. The firm provides a variety of services for its corporate and government customers, including management of military installations, specialty and electrical contracting and ground support for commercial airlines.
The firm, which earlier this year changed its name from Dynelectron Corp., has run into difficulty over the past year with the indictment of its electrical contracting subsidiary by federal grand juries in Atlanta and Louisville. The indictments charged that the subsidiary, Dynalectric, had engaged in illegal bid rigging on public contracts.
The Atlanta indictment resulted in the conviction in April of Dynalectric and its former president, G. Walther Ewalt. That case is now on appeal. The Louisville case is scheduled for trial in December.
Carnicero, a native Argentinian, cofounded DynCorp under the name of California Earner Airways Inc. in Oakland, Calif., in 1946. He currently owns about 10.6 percent of the firm's outstanding stock. Jacobs is the chairman of Memorex Corp. and a principal investor in a number of other firms, including Fuller Co., Industrial General Corp. and Jos A. Bank, a retailing concern