DynCorp International LLC, which has built a fast-growing business providing personal security and training police forces in Iraq and Afghanistan, announced yesterday that it would go public, aiming to raise $450 million.
The planned initial public offering comes less than a year after the firm was bought by Veritas Capital Fund LP, a New York-based private equity firm, for $850 million. DynCorp will use the proceeds to repay debt, cover operating costs and pay insiders a special $100 million dividend, according to a filing with the Securities and Exchange Commission. Veritas will continue to control the company after the offering, the filing said.
Based in Irving, Tex., DynCorp for years was one of the Washington region's largest defense contractors, with a headquarters in Reston. In 2003, it was bought by Computer Sciences Corp. for $677 million. Last December, Computer Sciences sold a part of the original company to Veritas. DynCorp currently has about 1,300 employees in the Washington area.
DynCorp is the second major defense contractor this month to announce plans to go public. Science Applications International Corp., the largest privately held defense contractor, said Sept. 1 that it wanted to raise $1.7 billion in a public offering. Despite expected cuts to the Pentagon budget, defense firms have remained popular on Wall Street -- particularly those with work related to the wars in Iraq and Afghanistan.
DynCorp has specialized in training law enforcement overseas and providing personal security to dignitaries, including Afghan President Hamid Karzai. The company said in its filing that it has a proprietary database of about 3,000 "qualified civilian police personnel" who can be deployed around the world.
For fiscal year 2005, operations in Iraq and Afghanistan accounted for 36.9 percent of DynCorp's revenue. But its business in those war-torn countries also prompted a note of caution in the filing yesterday.
"Insurgents in Iraq and Afghanistan have targeted installations where we have personnel and have contributed to the instability in these countries," the filing said. "This could impair our ability to attract and deploy personnel to perform services in either or both locations."
The instability has forced the company to increase compensation to employees working in those regions, the filing said. DynCorp reported a loss of $13 million in the fiscal year ended April 2005, on revenue of $1.9 billion.
One measure of DynCorp's growth during the past four years is its security unit, International Technical Services, which reported revenue of $1.2 billion in fiscal year 2005, up from $631.7 million in the previous fiscal year. The division, which also includes drug eradication and operating military bases, accounts for 65 percent of the company's revenue and has "witnessed strong growth as a result of the U.S. government's trend toward outsourcing critical non-combat related functions," according to the filing.
Security work is generally considered a low-margin business, but DynCorp sees increasing demand from foreign governments for that, as well as logistics and aviation services. In addition to providing security, DynCorp also offers peacekeeping support, humanitarian relief, de-mining services and aircraft and equipment maintenance.