GTSI deal brings fresh start to longtime player
- By Nick Wakeman
- May 07, 2012
When the planned sale of GTSI Corp. to Unicom Global closes later this year, the long-time government reseller will join a family of IT companies spread around the globe.
And a big plus is that GTSI will be Unicom’s biggest and virtually only foray into the federal market.
Many details are still unknown, such as how GTSI will be integrated into Unicom and who will lead the business if the current management moves on.
Unicom is paying $76.7 million for GTSI, a 47.9 percent premium over the company’s stock price on May 5.
"This is very positive for GTSI's employees and customers," said Dendy Young, a former GTSI CEO. "It really is a new start for them."
While the deal has to go through an approval process and GTSI is free to entertain other offers, the company’s biggest shareholder, Linwood “Chip” Lacy has entered into a tender agreement supporting the deal. Two other unnamed shareholders have signed similar agreements. Together they represent 17 percent of GTSI’s common stock.
The transaction is expected to close in the third quarter of 2012. When it does, GTSI will no longer be a publicly traded company.
Not being publicly traded should have an immediate impact on the bottom line of the company, Young said. "When I was there compliance cost us $3 million a year. That's a huge hit for a company like that," he said.
Unicom was founded in 1981 by Corry Hong and the company has followed an aggressive acquisition strategy, mostly built around mainframe computing, but it also has branched out in to areas such as software, document management, IT services, outsourcing and procurement.
The company has 18 corporate entities, most of which operate under their original brands. The company also has data centers on six continents.
Hong played lead guitar for a hard rock band in South Korea before immigrating to the United States when he was 20 to study computer science, according to an interview he gave earlier this year to Mainframe Executive magazine.
While Unicom does hold a GSA schedule for term software license and software maintenance, it currently has little federal business. It lists the Environmental Protection Agency and the Securities and Exchange Commission as its federal customers. It does list multiple state and local government customers.
Alan Bechara, who worked at GTSI from 1991 to 1996 and now is president of PC Mall Gov, a competitor, described GTSI as the “Coke” of the federal IT channel. “I would have traded anything to have their strong brand and market presence,” he said.
While the company has had its struggles in recent years with a procurement scandal, a suspension and falling revenues, it is still attractive because of its broad array of contracts and relationships with manufacturers, said Mark Amtower, a government marketing consultant.
“The fastest way into the market is buy your way in,” he said.
Bechara offered a list of positives that Unicom is getting with GTSI including contracts, past performance, vendor relationships, a top secret facility clearance, a strong brand name, and systems “fine tuned for this market.”
Officials with GTSI and Unicom were not available to comment beyond the statements in the press release.
The investment bank Raymond James & Associates and the law firm Holland & Knight served as advisers to GTSI. Stout Risius Ross Inc. provided a fairness opinion to GTSI’s board and a special committee of directors.
“Unicom Systems has made a smart decision if they intended to get into the federal IT market in a big way,” Bechara said.
The GTSI brand may have lost some momentum in recent years, but "they are still well known; everyone still knows who GTSI is," Young said.
Nick Wakeman is the editor-in-chief of Washington Technology. Follow him on Twitter: @nick_wakeman.