The financing for a proposed management takeover of DynCorp, the McLean defense contractor, has fallen through, throwing a new wrench into a deal that already had been widely derided by investors and financial analysts.
A commitment from Bankers Trust to provide up to $135 million needed to finance the proposed buyout expired late Wednesday with no decision from DynCorp's board on whether to accept the offer. That leaves the management group, headed by DynCorp President Dan R. Bannister, without financial backing for the deal, which could be worth as much as $270 million.
The board apparently has no other offers for consideration, but company officials said earlier this week that directors would begin looking into unspecified alternatives to increase shareholder value.
Despite the lack of financing, the management group's complex cash and securities offer -- officially estimated to be worth between $22.91 and $25 a share to stockholders -- still is on the table, according to company spokesman Lee Parker. If the board, which has been considering the proposal since Monday, should decide to accept it, the financing commitment from Bankers Trust could be revived, Parker said.
But market professionals have shown little faith in the offer, which contains less than $14 in actual cash. When the proposal was unveiled on Monday, DynCorp stock plunged $1.75 to $16.62 1/2. DynCorp closed yesterday at $16, down 12 1/2 cents.
"I don't believe the deal is dead ... but this does make it riskier than it was previously," said Charles Frumberg, an analyst with Mabon Nugent & Co. "This is not exactly the cleanest deal in the world."
The $135 million commitment from Bankers Trust was for bridge loans needed to pay for the first step of the management proposal -- a cash tender offer of $24.75 a share for about 48 percent of DynCorp's 10.8 million outstanding shares, enough to give the Bannister group control of the company. The second step of the plan called for a purchase of the remaining stock through a package consisting of cash and high-yield securities to be financed by the sale of between $44.7 million and $67.9 million in company assets.
That version of the offer replaced one withdrawn by the management group on Monday that would have paid $24.75 a share in cash and securities for all of the DynCorp stock.
The company estimates that the total value of the most recent offer is between $248 million and $270 million, depending on how much DynCorp gets for the assets to be sold.
But an independent committee of DynCorp's board failed to accept the offer before Bankers Trust's deadline of 5 p.m. Wednesday, and began exploring "other alternatives to maximize" value to shareholders. Those other alternatives have not been specified.
Analyst Frumberg said he expected the board to accept some offer to sell the company, if only to protect itself from potential shareholder suits.
The board may be moving cautiously because it already has been burned once. More than two months ago, a group headed by DynCorp Chairman Jose Carnicero offered $25 a share for the company, but the board turned that offer down. At the time, DynCorp officials were worried about a possible hostile raid by Miami financier Victor Posner, who had bought up about 10 percent of the company's stock.
Then came the stock market drop on Oct. 19. DynCorp stock plunged, and the board was unable to find a more attractive offer than the one it had rejected. Bannister's group came in with a $23-a-share offer, and later increased the bid to the package of cash and securities estimated to be worth $24.75 a share. But the Bannister group withdrew that version of the offer on Monday after the company ran into problems getting insurance because of the high degree of debt involved.