Jorge E. Carnicero, the chairman of McLean-based DynCorp, yesterday appeared to have won a turnaround victory in the three-month tussle for control of the government contracting company.
Carnicero, whose offer to buy the company in October was rejected by DynCorp's directors, yesterday won tentative approval from the board for a new takeover offer.
Although William H. Cartwright, DynCorp's vice president for corporate development, said the complexity of the cash and securities packaged in the bid made it impossible to estimate the total amount Carnicero offered, he said it "is far superior" to the most recent offer made for DynCorp by another management group led by DynCorp President Dan R. Bannister. That offer could have been worth as much as $270 million.
Bannister, who is vacationing, was not available for comment. His group had run into severe problems obtaining financing over the past few weeks.
Analysts say the new bid from Carnicero and Synergy Group Holdings, a subsidiary of a privately held propane distributor named Synergy Group Inc., could itself be shaky because financing is not yet complete. But Carnicero said he was confident that he and Synergy could borrow the $150 million needed for the deal, and DynCorp spokesman Lee Parker said the company expected an unidentified bank to sign a letter of commitment on a loan to finance the offer by Jan. 15.
Carnicero had been sitting out the bidding for DynCorp since the rejection of his $270 million takeover bid on Oct. 8.
The board then said it hoped it could get a better offer. But the stock market collapse on Oct. 19 hammered DynCorp's stock price, and the board accepted a bid from the Bannister group for $248 million. That bid, which Carnicero then supported, was sweetened to as much as $270 million, depending on how it was calculated.
A commitment from Bankers Trust Co. to provide up to $135 million for the Bannister offer expired Dec. 24 without the board accepting the offer. Sources said the Bannister group was having trouble getting insurance on its offer because of the high degree of debt involved. The sources also said there were problems setting up an employe stock ownership plan central to the offer. That gave Carnicero with the opportunity to make another bid.
Carnicero and Synergy's proposal calls for about $176 million of financing, about $150 million of it from banks and the rest from Synergy. Carnicero said yesterday that he felt "very strongly" there would be no problem obtaining the financing.
Carnicero said the deal would enable the company to remain "the way it is. ... My main objective is to keep the company with its own culture, to keep the company going."
Under the proposal, each of DynCorp's 10.8 million shares would be exchanged for $15.75 in cash, $5 of newly issued debentures, $2.50 of newly issued preferred stock, and 15 percent of the common equity of the new company.
DynCorp's stock closed yesterday at $16.75, up $1.37 1/2 in the wake of the announcement.
The proposal is subject to completion of the financing, the drafting of a merger agreement and the receipt of a favorable opinion on the offer from Dillon, Read, the investment bank advising DynCorp.
Analysts said yesterday that announcing the deal before securing financing was a negative, but that the offer appeared to beat Bannister's.
"The world is different after the crash," said Michael L. Mead, an analyst with Scott & Stringfellow in Richmond. "Lenders are more wary of participating in highly leveraged ... given the history so far, I think there is a risk that the current proposal won't go through."
Charles Frumberg, an analyst with Mabon Nugent in New York, called the lack of financing commitment "a negative," but said the offer was far better than Bannister's, which involved the sale of some DynCorp assets. "The other one was just air," Frumberg said. "There are assets being contributed by that group to secure the equity, and that is better than before."