Date: Nov 19, 2017 Author: Robert J Terry Source: bizjournals (
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Versar Inc.'s deal to be taken private for pennies on the dollar by Kingswood Capital Management is now official, with CEO Tony Otten replaced by Dwane Stone, a Kingswood operating executive with over 37 years of experience in the engineering and construction sector.
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Versar Inc.'s deal to be taken private for pennies on the dollar by Kingswood Capital Management is now official, with CEO Tony Otten replaced by Dwane Stone, a Kingswood operating executive with over 37 years of experience in the engineering and construction sector.
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In This Article
Bank of America Company
Dwane Stone Person
Government & Regulations Industry
Technology Industry
Tony Otten Person
Versar Company
By Robert J. Terry -- Senior Staff Reporter, Washington Business Journal
Nov 19, 2017, 11:32pm EST Updated Nov 20, 2017, 8:04am
Versar Inc.'s deal to be taken private for pennies on the dollar by Kingswood Capital Management is now official, with CEO Tony Otten replaced by Dwane Stone, a Kingswood operating executive with more than three decades experience in the engineering and construction sectors.
Otten will remain on as a consultant to assist in the transition. Kingswood paid 15 cents per share, or about $1.5 million, for the Springfield government contractor, launched in 1969 to provide a range of environmental consulting, engineering and construction management services.
"In taking Versar private and recapitalizing the balance sheet, we expect to decrease our costs of operation while increasing our flexibility and speed of decision making, resulting in tangible benefits to our employees, clients, partners and vendors," Stone said in a release.
A total of 5,633,150 shares of common stock of Versar, representing approximately 51.3 percent of the outstanding shares, were validly tendered and not withdrawn in the tender offer. Kingswood has accepted for payment all shares validly tendered and not withdrawn and will promptly pay for those shares.
The New York Stock Exchange informed the Securities and Exchange Commission that the company's common stock would stop trading on the exchange on Nov. 17.
Versar, which employs more than 400, announced Sept. 25 it had agreed to be taken private on the cheap, a move blasted by some analysts but seen as critical to shoring up Versar's debt and putting it on a path to growth and profitability. Executives had long pointed to stubborn challenges in the government program management market as well as strained relations with its lender, Bank of America (NYSE: BOA).
When the deal was announced, Otten called it a "pivotal day" for Versar, "the beginning of our future." Otten stands to take $787,694 with him in severance pay and benefits, according to filings.
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Challenges began to mount at Versar last year. Beginning in May 2016, the company had to take two noncash charges against its income totaling $18.8 million. The earnings hit ultimately led to the company violating the terms of its loans, putting it in technical default. The company secured several forbearance agreements with its lenders, but couldn't secure a clean opinion from its auditor and opted not to release several quarterly financial statements.
This delayed filing prompted the NYSE to threaten Versar with a delisting should it continue to delay the release of its financials. In December, the company entered into a loan amendment and by May said it had filed long-delayed financial reports that kept its shares trading on the exchange.
While the company was able to thwart the delisting threat tied to the financial releases, the specter of a delisting re-emerged when the company revealed in its May earnings that it held only $1.07 million in stockholders' equity, below the exchange's requirement of $2 million.
Versar posted a fiscal 2017 loss of $9.6 million, or 96 cents per share, on revenue of $111.8 million. Sales plunged 33 percent compared with the prior fiscal year. Versar posted a loss of almost $38 million, or $3.84 per share, in fiscal 2016. Its accumulated deficit is about $37 million, according to SEC filings.
The deal officially closed Nov. 10. Alex Wolf, Kingswood's managing partner, said in a statement his Los Angeles-based firm was "impressed with Versar's strong platform and rich history of leadership in the government services sector. We look forward to supporting Dwane and the entire management team at Versar, as they work to improve operations and expand Versar's position in the market. Kingswood will provide Versar with the oversight, operating resources and capital necessary to strategically position the business for long-term success."
