Engility Holdings, Inc. (NYSE:EGL) and Dynamics Research Corporation
(“DRC” - NASDAQ:DRCO), today announced that they have entered into a
definitive agreement under which Engility will acquire DRC. DRC is a
U.S. government services, information technology and management
consulting firm with leading capabilities in Healthcare, Homeland
Security, Research & Development, Intelligence, Surveillance &
Reconnaissance (ISR), Financial Regulation & Reform, and Defense
Readiness, Logistics and Command, Control & Communications (C3).
Under the terms of the agreement, Engility will commence a tender offer
for all outstanding shares of DRC common stock at a price of $11.50 in
cash for each outstanding share. The transaction, which was unanimously
approved by the boards of directors of both companies, is expected to be
accretive to Engility’s 2014 earnings and significantly accretive to
2015 earnings and beyond. The acquisition is anticipated to close during
the first quarter of 2014, subject to customary closing conditions and
regulatory approval.
Founded in 1955, DRC has a proven track record of supporting the
government’s highest priority programs in the Science and Engineering,
IT, and technical and management consulting markets. DRC’s broad
portfolio of over 300 active contracts, with prime positions on key
Department of Defense (DoD) and federal civilian agency Indefinite
Delivery, Indefinite Quantity (IDIQ) contract vehicles, will expand
Engility’s addressable market and further diversify its customer base in
the U.S. Air Force, U.S. Navy, Department of Health and Human Services,
Department of Veterans Affairs, Department of Homeland Security,
Intelligence Community, and other federal civilian and DoD customers.
DRC has more than 1,100 employees, is a prime contractor on
approximately 80% of its work, and has a track record of solid financial
performance, with estimated revenue in 2013 of $274-277M and adjusted
EBITDA of $24.3-24.7M.
“This acquisition is consistent with our strategy to expand and
diversify our services offerings and presence with adjacent customers.
It positions Engility within new higher-end markets, supporting enduring
customer priority missions, and provides access to key prime contract
vehicles. Long-term success in today’s consolidating federal services
market will depend on both organic growth and strategic M&A to derive
the benefits of scale and provide contracting flexibility to our
customers,” said Engility President and CEO Tony Smeraglinolo. “DRC’s
leadership team has successfully repositioned the company in high
priority market areas. The company’s impressive contract portfolio
significantly expands our combined market opportunity in areas where we
currently do not have an existing customer relationship or where we are
currently underrepresented. I look forward to welcoming DRC’s
highly-talented employees to the Engility team.”
Jim Regan, DRC’s Chairman and CEO, added, “We are very excited to join
the Engility team. Its customer and mission focus, long-term growth
strategy and competitive business model are differentiated in the
pure-play services market. Engility’s scale and ability to focus on
growth in our high priority markets offers compelling new opportunities
to both our employees and customers. It is a great cultural fit, and our
customers will benefit from our combined expertise and broader service
offerings.”
Completion of the transaction is subject to, among other things, the
valid tender without withdrawal of a two-thirds majority of the
outstanding shares of DRC common stock, regulatory approvals including
approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
and other customary closing conditions. Following completion of the
tender offer, subject to customary exceptions, any shares of DRC stock
not tendered will be converted into the right to receive the same price
per share paid by Engility in the tender offer. The transaction is not
subject to any financing condition.
Bank of America Merrill Lynch is serving as the financing provider to
Engility.
SunTrust Robinson Humphrey, Inc. is serving as financial advisor to
Dynamics Research Corporation, and Stifel, Nicolaus & Company,
Incorporated provided a fairness opinion to DRC’s board of directors in
connection with the transaction.
Bass, Berry & Sims PLC is providing legal counsel to Engility; Holland &
Knight LLP and Nixon Peabody LLP are providing legal counsel to Dynamics
Research Corporation.
CONFERENCE CALL INFORMATION
Engility will host a conference call at 8:30 A.M. ET on December 23,
2013, to discuss the acquisition and answer questions from investors and
financial analysts.
Listeners may access a webcast of the live conference call from the
Investor Relations section of the company's website at http://www.EngilityCorp.com.
Listeners may also access a slide presentation on the website. Listeners
should go to the website at least 15 minutes before the live event to
download and install any necessary audio software.
Listeners also may participate in the conference call by dialing (866)
543-6403 (primary) or (617) 213-8896 (secondary) and entering pass code
28375522.
A replay will be available on the company's website approximately two
hours after the conference call and continuing for one year. A
telephonic replay also will be available through December 30, 2013 at
(888) 286-8010 (primary) or (617) 801-6888 (secondary) and entering pass
code 20966515.
ABOUT ENGILITY CORPORATION
Engility is a pure-play government services contractor providing highly
skilled personnel wherever, whenever they are needed in a cost-effective
manner. Headquartered in Chantilly, Virginia, Engility is a leading
provider of specialized technical consulting, program and business
support services, engineering and technology lifecycle support,
information technology modernization and sustainment, supply chain
services and logistics management, and training and education for the
U.S. Government. Engility has approximately 7,000 employees worldwide
and achieved revenue of $1.66 billion in 2012. To learn more about
Engility, please visit www.engilitycorp.com
ABOUT DYNAMICS RESEARCH CORPORATION
Dynamics Research Corporation (DRC) provides technology and management
consulting solutions focused on driving performance, process and results
for government clients. DRC offers innovative solutions and delivers
rock solid results. DRC has large company capabilities and small company
agility. Founded in 1955, DRC is a publicly held corporation
(Nasdaq:DRCO) and maintains more than 25 offices nationwide with major
offices in Andover, Massachusetts and the Washington, D.C. region. For
more information please visit our website at www.drc.com.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements with respect to
the tender offer and related transactions, the expectation that the
transaction would be accretive to Engility's earnings, expectations with
respect to synergies and cost savings, the closing of the tender offer
and related transactions, the combined capabilities of the companies,
expectations regarding DRC's 2013 estimated revenue and EBITDA,
expectations regarding expanded market opportunities, size and growth,
market and industry trends, and general business outlook. When used in
this press release, the words "will," "expected," "anticipated," similar
expressions and any other statements that are not historical facts are
intended to identify those assertions as forward-looking statements.
Such statements are based on a number of assumptions that could
ultimately prove inaccurate, and are subject to a number of risk
factors, including the inability to achieve anticipated synergies, cost
reductions or operating efficiencies without unduly disrupting business
operations, unexpected costs associated with, or inability to complete,
integration activities in a timely manner, the possibility that key
personnel of DRC may not be retained by Engility, responses from
competitors, customers, and partners, uncertainties regarding the timing
of the closing of the transaction, uncertainties as to how many of DRC's
stockholders may tender their stock in the tender offer, the possibility
that a governmental entity may prohibit, delay or refuse to grant
approval for the consummation of the transaction, and general economic
and business conditions. Engility does not assume any obligation to
update any forward looking statement, whether as a result of new
information, future events or otherwise. Factors that could cause actual
results of the tender offer to differ materially include the following:
costs related to the transaction, the risk of failing to obtain any
regulatory approvals or satisfy conditions to the transaction, the risk
that the transaction will not close or that closing will be delayed, the
risk that Engility's and DRC's respective businesses will suffer due to
uncertainty related to the transaction, the competitive environment in
our industry and competitive responses to the transaction as well as
risk factors set forth above. Further information on factors which could
affect the company's financial results is provided in documents filed by
Engility with the U.S. Securities and Exchange Commission.
NOTICE TO INVESTORS
The tender offer for the outstanding shares of common stock of DRC
described in this communication has not yet commenced. This press
release is for informational purposes only and is not an offer to
purchase any shares of DRC or a solicitation of an offer to sell
securities. At the time the tender offer is commenced, Engility will
file a tender offer statement on Schedule TO, including an offer to
purchase, a letter of transmittal and related documents, with the United
States Securities and Exchange Commission (the “SEC”) and DRC will file
a solicitation/recommendation statement on Schedule 14D-9 with the SEC.
The tender offer statement (including an offer to purchase, a related
letter of transmittal and other offer documents) and the
solicitation/recommendation statement will contain important information
that should be read carefully before any decision is made with respect
to the tender offer. Such materials will be made available to DRC
stockholders at no expense to them. In addition, such materials (and all
other offer documents filed with the SEC) will be available at no charge
on the SEC’s website at www.sec.gov.
Copyright Business Wire 2013