Engility to Acquire Dynamics Research Corporation
CHANTILLY, Va. & ANDOVER, Mass. — Engility Holdings, Inc. and Dynamics Research Corporation (DRC), 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).
“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.”
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.
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.