An affiliate of an Alexandria, Va., private equity firm is proposing to acquire Moon engineering firm Michael Baker Corp. for $24.25 per share in cash, a 26 percent premium over the stock's average price over the last month.
The proposal was made in a letter that Thomas J. Campbell of DC Capital Partners sent Wednesday to Baker Chairman Richard L. Shaw. DC Capital owns a 5.2 percent stake in Baker.
The proposal places a $233 million price tag on Baker, which reported 2011 revenue of $538.4 million.
The letter was disclosed as part of a securities filing made by the private equity firm. In it, Mr. Campbell said he is ready to negotiate a definitive agreement and that his firm expects to have financing commitments from financial institutions in the near future.
Baker said it will review the proposal and respond in due course.
The move comes a week after Baker president and CEO Bradley L. Mallory resigned at the request of Baker's board. DC Capital has been a vocal opponent of an acquisition-based strategy championed by Mr. Mallory, the former Pennsylvania transportation secretary who had been Baker's top executive officer since February 2008.
Mr. Campbell told Mr. Shaw that Baker has invested more than $100 million in acquisitions since 2010 and that the purchases have "not provided any significant value creation to shareholders." Mr. Campbell wrote that he "was surprised and somewhat alarmed by the abrupt departure" of Mr. Mallory, who had participated in recent talks with DC Capital.
He told Mr. Shaw he was pleased with the company's decision to repurchase shares and institute a quarterly dividend, but that the initiatives were not enough.
"The company's long-term growth strategy has resulted, and I believe will continue to result, in a significant undervaluation of the stock," Mr. Campbell wrote.
When it disclosed its stake in Baker in July, the private equity concern said it wanted to pursue strategic alternatives with Baker, including seeking seats on the engineering firm's board or acquiring its shares. Mr. Campbell's letter proposed that the acquisition would be engineered through KS International, which is owned by a company DC Capital has a controlling interest in.
KS International is based in McLean, Va. It provides operations and maintenance, security and other services to the U.S. Department of State, the Pentagon, the U.S. Department of Homeland Security and other clients.
The letter was disclosed after Wall Street closed. Baker shares finished Wednesday at $21.85, up 90 cents. They are up 10 percent since Mr. Mallory's resignation was announced Dec. 13.
Len Boselovic: email@example.com or 412-263-1941.