Cerberus to take defense contractor DynCorp private in $1 billion deal

Cerberus to take DynCorp private in $1B deal

FALLS CHURCH, Va. — DynCorp International, which has helped train the national police in Afghanistan, said Monday that it is being bought out by private equity firm Cerberus Capital Management for $1 billion.

The deal includes debt which pushes its total value to $1.5 billion.

A recent decision to shift control of the training program in Afghanistan from the State Department to the military may bring to a close the contract that DynCorp has held since 2003.

The company is challenging the decision.

Under the deal announced Monday, DynCorp shareholders would get $17.55 in cash for each share, a premium of 49 percent from Friday’s closing price of $11.75.

DynCorp also gets 28 days to seek competing bids.

The private equity market has begun to thaw and there are other firms that may seek entry into the defense market through an established player.

Shares of DynCorp International Inc. soared $5.66, or 48.2 percent, to close at $17.41 Monday.

As part of the agreement, DynCorp’s biggest shareholder, Veritas Capital Fund Management, agreed to vote its 34.9 percent ownership in favor of the sale.

DynCorp provides services such as aviation support in Iraq to helping flood victims in the U.S. It has contracts in Kuwait and Afghanistan.

Two possible drug-related deaths in Afghanistan by two contractors has raised concerns about how well the company selects and manages employees assigned to a police training contract that is considered key as the U.S. looks to hand over more of the security burden to the Afghans.

The company reported profit of $61.6 million, or $1.09 per share, for the first three quarters of its fiscal year on revenue of $2.5 billion.

“I believe that under this partnership with Cerberus, DynCorp International will be able to build on our extensive heritage and successful performance to continue to achieve our growth objectives,” said President and CEO William L. Ballhaus.

The company’s Web site said it has recruited, trained, and deployed more than 6,000 civilian peacekeepers and police trainers to 11 countries, including Haiti, Bosnia, Afghanistan, and Iraq, for the Department of State. It also provides support to protect diplomats in high-threat counties and support services for drug-interdiction efforts in South America.

The deal is expected to close before the end of the year.