FEATURE

Big Deals Doin'

When you talk about consolidation in the firearms industry anymore, it takes a big deal to raise many eyebrows. A really big deal has quietly slid under the industry's radar - until today.

Cerberus, one of the nation's largest private investment groups, has agreed to acquire security giant DynCorp International (NYSE: DCP, a self-described "leading global government services provider in support of U.S. national security and foreign policy objectives") in a deal valued at $1.5 billion dollars.

In the transaction, Cerberus gets an instant presence in the wold of "specialized, mission-critical professional and support services outsourced by the United States military, non-military United States governmental agencies and foreign governments."

It also gets some customers known for repeat business: both the Departments of Defense and State, foreign governments, commercial customers and "certain other United States federal, state and local government departments and agencies."

In fact, DynCorp discloses that revenues from the United States government accounted for ninety-six percent (96%) of its total revenues for the fiscal year ending April 3, 2009. In January, DynCorp itself expanded, acquiring Casals and Associates.

Wall Street observers say for Cerberus, the deal represents the return to its core business- deal making. In this deal, Cerberus will pay $17.55 per share for DynCorp, a 49 percent premium over last Friday's $11.75 benchmark pricing close.

Today, DynCorp has approximately 21 days remaining in what was essentially a 28-day try-to-find-a-better-deal agreement within the overall deal.

"I believe that under this partnership with Cerberus, DynCorp International will be able to build on our extensive heritage and successful performance to continue to achieve our growth objectives," William L. Ballhaus, DynCorp's chief executive, said in a statement. "Importantly, this transaction is a major milestone for DynCorp International's continued leadership in serving our customers and supporting U.S. national security and foreign policy objectives."

"This exciting news underscores our successful track record in the government services sector and furthers our goal of continuing to grow our portfolio in this area," says, Cerberus Managing Director Timothy F. Price, "DynCorp International has a demonstrated history of strong customer oriented performance, from a unique global platform. We are confident that DynCorp International will continue to serve its customers well while expanding its service offerings to current and prospective customers."

Cerberus has lined up financial partners that include Bank of America, Merrill Lynch, Citigroup, Barclays, and Deutsche Bank, with all capital requirements in place.

Barring regulatory hassles (no guarantee in today's business climate) it looks like all involved parties are a go with the deal. Veritas Capital, DynCorp's largest shareholder, is in favor of the deal, locking up 34.9 percent of the outstanding stock. It's a fairly safe bet that sometime in the fourth quarter of this year DynCorp will become a wholly-owned private company owned by Cerberus.

In the meantime, Cerberus' firearms holding company Freedom Group, progresses quietly along the regulatory processes necessary to take itself public. According to a preliminary prospectus filed with the Securities and Exchange Commission on March 23, a 2010 offering remains the goal, although share numbers and a target IPO price are not disclosed.

Freedom Group's family of companies includes Bushmaster Firearms, Remington, DPMS/Panther Arms, Marlin (including H&R, New England Firearms and L.C. Smith), EOTAC, INTC, Dakota Arms (including Miller Arms and Nesika), Advanced Armament Company, and Barnes Bullets.

That translates into a significant share of the overall industry market. According to SEC documents, Freedom Group's family of companies generated $848.7 million in net sales, $54.5 million in net income, and $178.1 million Adjusted EBITDA.

The company also enjoys the top U.S. market share positions in shotguns, traditional rifles and sporting rifles. As of today, there is no handgun component in place, but the intent to launch a Remington-branded handgun line(s) is quite possibly one of the most widely known "secrets" in the firearms industry.

Recent moves to consolidate manufacturing and production processes include the Marlin impending relocation from its long-time home for a yet-undecided Remington location and the imminent closure and disposal of Bushmaster's Arizona manufacturing facilities.

In the meantime, sources tell The Outoor Wire Digital Network that Montana's Congressman Denny Rehberg has been "personally assured" by Alliant Techsystems (NYSE:ATK) that the company's controversial purchasing of demilled, once-fired military brass from individual military post commandants was "done". That program launched a firestorm of protest from ammunition reloaders toward the small arms ammunition manufacturer after Montana Shooting Sports Association president Gary Marbut alleged ATK was trying to "pull an end-run" around a Congressional directive to stop the process of destroying once-fired military brass.

ATK, according to sources in Rehberg's office, simply decided the program was simply not worth the ill-will it created with individual firearms owners and reloaders.

While officials applaud ATK's decision, we're also hearing that it's not enough to assuage the concerns of firearms proponents. They, we're told, want a clear directive to all military commanders to stop destroying once-fired brass.

We'll keep you posted on that one.

Connecticut outdoorsmen (and women) have succeeded in pushing a measure to rollback that state's sportsman's fees and cap state park and camping fees.

H.B. No 5545 said funds accruing from any permit, tag, or stamp fees, excluding the migratory bird conservation stamp and fees paid by trappers and anglers, fund the programs and functions of the Bureau of Natural Resources within the Department of Environmental Protection (DEP) according to federal regulations and requires the DEP to submit an annual report to the federal Fish and Wildlife Service, detailing the funds raised, expenses, and spending purposes of sportsman's fees and stamps.

Governor M. Jodi Rell, who had a hand in the drafting of the measure, immediately signed the bill after passage -just in time to reduce fishing fees for the season which opens tomorrow from $40 to $28 per in-state angler.

If you've bought your license, however, don't expect a refund. The cuts in fees are for future payments, not purchases already made.

As always, we'll keep you posted.

--Jim Shepherd

Apr 17	5th Annual Sporting Clays Tournament Benefiting Ronald McDonald House Charities of Central Valley, Inc. Sun Mountain Gun Club, Coarsegold, CA
Apr 17	Mountain Bike 101 Government Canyon SNA, Texas
Apr 22-25	The PSA Shootout Palmyra Sportsmans Club, Sportsman Rd and Plum St, Palmyra, Pennsylvania
May 7-8	Jacksonville Kayak Fishing Classic Captain's Meeting: St. Ephrem Syriac Catholic Church, Jacksonville, Florida
May 8	Ruger Rimfire Series, California Southwest Regional California Wheelburners Range, Piru, CA

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