On Wednesday, the Financial Times of London reported that General Dynamics was acquiring a security technologies company named Anteon for $2.2 billion "to be able to provide more services to its government clients."[1]  --  In a separate piece, James Politi reported for the Financial Times that Anteon was being purchased from "a mid-sized U.S. private equity group" named Caxton-Iseman, which had originally taken control of Anteon for $32.5 million in 1996, with the buy-out had made $700 million from Anteon, which went public in 2002.[2] -- "Mr. Kampf and Anteon’s senior management, which also invested in the company early and will become managers at General Dynamics, are expected to make 'hundreds of millions of dollars' as a result of the deal, according to people familiar with the matter," Politi reported.  --  As Lex commented sardonically (also in the Financial Times), "The war on terror has claimed many victims.  Defense contractors are not among them.."[3]  --  Lex noted that "about 90 per cent of [Anteon's business] still depends on the U.S. federal government in one way or another."  --  In August 2002, Virginia Business described some of Anteon's business: "Another Fairfax defense firm that recently went public is Anteon Corp.  It collected $250 million after selling 15 million shares in its offering.  The company boosted its share price twice before trading began and shares are selling about 40 percent above the IPO price.  As with others, Anteon is using advanced IT systems to bring information closer to the battlefield.  When Bush sent troops to Afghanistan, Anteon sent personnel to help provide network administration for two of the key computer systems designed for sharing information among NATO allies and coalition forces.  Coordination can be much harder than simply getting troops and supplies to a war zone.  'During the Gulf War, troops, ammunition, supplies and food were dumped in the desert,' says Joe Kampf, chief executive officer of Anteon. 'But no one knew where anything was.'  So, when the Air Force needed a way to coordinate supplies and troops, it called on Anteon to manage and integrate the Cargo Movement Operations System -- known as the Federal Express of the Air Force."  --  See also an Aug. 18, 2004, piece in Business Week....


By Andrei Postelnicu in New York

NEW YORK -- General Dynamics, the U.S. defense contractor, said on Wednesday it agreed to buy Anteon, a security technologies company for about $2.2bn to be able to provide more services to its government clients.

Anteon agreed to be taken over for $55.50 per share in cash, or a 36 per cent premium over its stock's closing price on Tuesday. As part of the takeover agreement, General Dynamics will assume Anteon's $100m in debt.

GD makes warships and other weapons systems and is the largest communications systems supplier for the U.S. military. The acquisition of Anteon will bring to its service portfolio security and surveillance technologies including systems monitoring access to ports and border points.

General Dynamics said it expected the transaction to close by the second quarter of next year and to contribute to earnings immediately.

Investors appeared to greet the deal with enthusiasm, bidding Anteon shares up 33.1 per cent to $54.25 in pre-market trading.



By James Politi

Financial Times (UK)
December 14, 2005

http://news.ft.com/cms/s/f7e8429a-6ca4-11da-90c2-0000779e2340.html (subscribers only)

NEW YORK -- Caxton-Iseman Capital, a mid-sized U.S. private equity group, completed an extremely lucrative buy-out when it agreed to sell Anteon International, an information technology services provider, to General Dynamics, the defenSe contractor, for $2.1bn in cash.

After the deal, Caxton-Iseman’s $32.5m investment will have returned more than $700m to the private equity firm, which took Anteon public in 2002 and has since reduced its stake to about 6 per cent.

In recent years, much of the attention in the private equity industry has been centered on the big pay-outs to investors from the largest firms, such as Kohlberg Kravis Roberts, Blackstone, and Bain Capital. But below that level, dozens of smaller firms are battling to secure deals such as Caxton-Iseman’s -- which has produced a return of more than 20 times the money it invested.

In the late 1990s, Caxton-Iseman joined forces with Joe Kampf, Anteon’s chief executive, to take over the company, at the time a small but promising supplier of IT services to the U.S. government.

Mr. Kampf and Anteon’s senior management, which also invested in the company early and will become managers at General Dynamics, are expected to make “hundreds of millions of dollars” as a result of the deal, according to people familiar with the matter.

Since 1996, when Caxton-Iseman took control of Anteon, the company experienced a surge in revenues from about $110m to $1.5bn as it grew organically and pushed through a series of acquisitions. After the initial public offering, Anteon shares rode the wave of soaring valuations in the defense industry, jumping from $18 at the listing to $54.05 in morning trading yesterday, slightly below the $55.50 offered by General Dynamics. The offer represents a 36 per cent premium to Anteon’s closing share price on Thursday.

Fred Iseman, Caxton-Iseman president, said he was "very proud" of the investment and Anteon’s "extraordinary growth."

The deal will rank as the most lucrative in the history of Caxton-Iseman, which has about $2bn under management and was formed in 1993 when Mr. Iseman secured the backing of Bruce Kovner, the New York hedge fund manager that owns Caxton Corporation.




Financial Times (UK)
December 14, 2004

http://news.ft.com/cms/s/9f3ee28e-6cb8-11da-90c2-0000779e2340.html (subscribers only)

The war on terror has claimed many victims. Defense contractors are not among them. That is especially true for the ones that specialize in information technology to help U.S. government agencies make sense of raw data. Hence the interest by traditional defense companies to beef up their presence in the area through acquisitions.

General Dynamics’s purchase of Anteon International is only the latest example. At $2.2bn in cash and assumed debt, the price tag should certainly please Anteon’s shareholders, including Caxton-Iseman, the private equity group that took it public. Based on consensus forecasts for next year, that translates into about 1.3 times sales and 13.7 times earnings before interest, tax, depreciation, and amortization. That is hefty for what is essentially an IT services business, even by the standards of recent deals.

Years of acquisitions have left Anteon with an impressive client list, ranging from the Department of Defense to the Federal Emergency Management Agency, whose emergency management information system it set up. But while its business is well diversified across different agencies, about 90 per cent of it still depends on the U.S. federal government in one way or another. Despite stringent procurement rules, that has been a boon in recent years. The need to replace aging government infrastructure, procurement reform and the growing prominence of homeland security suggest that there should be scope for further growth.

The era of the U.S. government splashing out on defense in general, however, is already drawing to a close. Indeed, budgetary pressures on their traditional businesses are one of the main reasons why defense contractors are keen to expand their services arms. Given that backdrop, it would hardly take a sudden outbreak of peace for General Dynamics own rating at 15.5 times earnings to come under pressure.