After months of boardroom turmoil, Michael Baker Corp. said on July 29 it would take a $397-million buyout offer from an affiliate of DC Capital, a private-equity firm and shareholder that had offered to buy the Pittsburgh-based engineer late last year for $233 million.

Baker says the $40.50-per-share cash offer was a 37% premium on its $29.60 closing share price on July 26.

Andrej Avelini, managing director of industry financial consultant EFCG, said the offer value is "almost nine times 2013 expected EBITDA [earnings before interest, taxes, depreciation and amortization], which is toward the upper end of the range of recent comparable transactions."

The sale, to Integrated Mission Solutions LLC (IMS), Alexandria, Va., is set to close by the early fourth quarter, which would create a company with $1 billion in revenue and 5,000 employees, according to Thomas J. Campbell, DC Capital founder and IMS chairman.

Neither the announcement nor the IMS website provided much detail on the nature of IMS' work other than a focus on "technology and intelligence" for federal clients.

Baker says the company name and headquarters will remain, and spokesman David Higie confirms that IMS will "essentially maintain the current organization and staffing for a one-year period."

Three Baker board members will join the IMS board.

Higie would not confirm other buyout offers, but sources say financial adviser Houlihan Lokey's promotion of the firm's sale was aggressive.

One Baker source says buyout offers also were made by Canadian-based, publicly owned engineers Stantec and Genivar.

Tahira Afzal, sector analyst for KeyBanc Capital Markets, terms the acquisition offer a "fair price for Baker, which has faced headwinds over the past year, plus due to the competitive landscape in both its federal and transportation end markets."

Baker ranks at No. 30 on ENR's list of the Top 500 Design Firms, with $502.3 million in 2012 design revenue.

"I heard that even though the board was lukewarm to selling to a private-equity firm, they weren’t going to give the firm away, either, so the price is a hefty premium and shareholders got what they wanted," says one industry financial observer. "The stock surged today, up $10, to $40, as markets opened."
He adds that the buyout "takes the overhang of murky strategic direction and succession off the table and links [Baker] with growth-oriented investors."

The firm is "too small to be publicly traded, in my mind, with today’s markets and going private allows them to get their house in order and perhaps try to go public down the road," he adds.