Michael Baker Corp. agrees to $396.9 million acquisition

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Michael Baker Corp. said Monday it will be acquired for $396.9 million in cash by an affiliate of the Alexandria, Va., private equity firm that has been pursuing it for a year.

The purchase price amounts to $40.50 for each share of Baker stock and is well above the $24.25 per share unsolicited offer DC Capital Partners made for the Moon engineering services concern in December. DC Capital Partners disclosed last July that it acquired a 5.2 percent stake in Baker.

The private equity firm will make the acquisition through Integrated Mission Solutions, which provides engineering, construction, consulting and other services to the intelligence community, the military and other federal agencies.

Baker becomes the third Pittsburgh-based company to be acquired or slated to be acquired by a private equity firm this year. 3G Capital Partners and Warren Buffett's Berkshire Hathaway paid $28 billion for H.J. Heinz in June and rue21 is expected to be acquired before the end of the year by London-based Apax Partners, which will pay $1.1 billion for the Cranberry retailer.

IMS chairman Thomas J. Campbell said the combination will create a company with more than $1 billion in revenue and approximately 5,000 employees. Baker said in a press statement that IMS has agreed that Baker will retain its name and that it will keep the organization and staff of the company "essentially intact."

About 750 of Baker's 3,000 employees work in Western Pennsylvania, Baker spokesman David Higie said. The company reported a profit of $2.8 million last year on revenue of $593.4 million.

"We believe this union with IMS will provide substantial value to shareholders," Baker chairman Robert N. Bontempo said in a prepared statement.

Baker's board unanimously approved the offer. The transaction is subject to review by government antitrust regulators. It is expected to be completed late in the third quarter or early in the fourth quarter.

Mr. Higie said a detailed proxy statement outlining how the board analyzed DC Capital's offer and the factors that led directors to accept it will probably be filed in late August.

Baker shares closed Monday at $40.30, up $10.79.

The $40.50 per share price is a 37 percent premium to the $29.60 Baker stock closed at Friday. It is nearly double what Baker shares were trading for before DC Capital made its original offer.

"It looks like they got a very good price," said John Rogers, an analyst with D.A. Davidson & Co.

The offer will bring a windfall to Baker's largest shareholder, the company's 401(k) plan. The retirement plan will realize about $39 million based on its 9.9 percent stake in the company. According to Baker's most recent proxy statement, issued in April 2012, officers and directors owned about another 4 percent of Baker's shares.

This is not IMS' first acquisition of a Western Pennsylvania company. In 2011, it acquired Sallyport Global, a Bridgeville-based company that assisted in the post-war reconstruction of Iraq.

DC Capital's initial offer came shortly after the sudden departure of former Baker president and CEO Bradley L. Mallory, who resigned Dec. 13. In January, Baker announced it had hired investment banker Houlihan Lokey and Jones Day, a law firm, to help it consider strategic alternatives.

Not wanting to risk losing key employees because of the uncertainty, Baker disclosed earlier this month that it will give retention awards to an undisclosed number of employees who remain with the company through March 1. Mr. Higie declined to say how much the incentives will cost.

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Len Boselovic: lboselovic@post-gazette.com or 412-263-1941. First Published July 29, 2013 10:00 AM


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