DynCorp Merges State and Local Gov't Unit With TekInsight.com

TekInsight.com Inc. and DynCorp have signed a formal agreement to merge their state and local operations, creating a combined company of 400 employees and annual revenue approaching $100 million.

According to the agreement, DynCorp Management Resources, its state and local services subsidiary, will become part of TekInsight.com, which will have a controlling interest over the new company, said DynCorp of Reston, Va.

TekInsight of Irvine, Calif., will issue shares of newly created Class B Common Stock as consideration for the transaction. If the deal is approved by TekInsight shareholders, DynCorp would hold about 40 percent of TekInsight's fully diluted, common equivalent shares.

The companies announced the agreement April 26.

"The merger of DynCorp Management Resources multistate operations with our own gives us a 17-state coverage footprint immediately, along with a broadened service set," said Steven Ross, TekInsight's chief executive officer.

Holli Ploog, DMR's president, said the merger "puts the two companies ? which are currently close to the same size, but combined will have a revenue base of $100 million or greater ? into a whole new league."

Ploog noted that Washington Technology's annual state and local report only highlights those companies with annual revenue from this business in excess of $100 million, and said she believes TekInsight will make the list in 2002.

"It's kind of a magical number," she said of the $100 million threshold.

DMR, which was formed in 1996, provides a variety of information technology and business process outsourcing services. Paul Lombardi, DynCorp's president and CEO, told Washington Technology in March that the company's state and local business brought in $27 million in 2000, and was on course bring in $50 million in $2001.

DynCorp employs 20,000 people and has annual revenue of about $1.8 billion.

TekInsight's services include consulting, infrastructure planning and deployment, application development and legacy integration and support. The company, which had revenue of $1.9 million for the fiscal year ending June 30, 2000, reported revenue of $10.7 million for the quarter ending Dec. 31, 2000. The net loss for the quarter was $2 million.

As a result of the deal, "DynCorp would have significant ownership in a public vehicle with tremendous upside potential," said John Allen, managing director, Quarterdeck Investment Partners Inc., Washington. "It seems it might be a creative move on the part of DynCorp."