M&A

Versar finds buyer to take firm private

Springfield, Va.-based government services contractor Versar said Monday it has agreed to be acquired by Los Angeles-based private equity firm Kingswood Capital Management for close to $1.5 million.

At 15 cents per share, Kingswood is buying the engineering and professional services provider at a major discount against Versar’s closing price of 48 cents per share Friday. Versar’s market capitalization is almost $4.1 million as of Friday’s close.

Kingswood will also assume Versar’s estimated $50.1 million in total debt and other liabilities. The contractor also reported an accumulated deficit of $37 million in its fiscal year 2017 financial results announced alongside the transaction.

Speaking in a call with investors Monday, Versar CEO Anthony Otten said the company and its advisers contacted almost 150 potential strategic and financial sources to examine potential options for improving its liquidity.

“This is a challenging time in the government contracting world and with the company’s working relationship with our lender Bank of America. These factors were prominent in the board’s decision to accept the offer from Kingswood,” Otten said in the call.

The New York Stock Exchange has halted trading of Versar’s shares and has started delisting procedures on the company’s failure to ensure at least $2 million in shareholder equity, Otten added. Shareholder equity is a company’s total assets minus total liabilities and is a metric watched by analysts to determine overall financial health.

Versar reported a $5.8 million shareholders’ deficit in its fiscal 2017 financial report versus last year’s $1.07 million equity.

Both Versar and Kingswood expect to close the deal in November. Kingswood will start its cash tender offer for shares in Versar on or before Oct. 6. The offer will expire 25 days after its start.

Versar reported a net loss of $9.6 million for its most recent fiscal year ended June 30 versus the $37.9 million loss reported in the prior period. Fiscal 2017 revenue of $111.8 million was 33.4 percent lower than the previous year’s figure.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also find and connect with him on LinkedIn.

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