Analyst: Bid for Michael Baker may be low
An unsolicited offer from a private equity firm to take over Michael Baker Corp. and merge it with another engineering company seems low but earnest, said a Wall Street analyst Thursday.
Michael Baker, based in Moon, received an all-cash offer of $24.25 a share on Wednesday from DC Capital Partners, Alexandria, Va. The firm, which owns 5.2 percent of Michael Baker's stock, proposes to merge it into KS International LLC, McLean, Va., which is controlled by DC Capital Partners.
KS International is an engineering, professional services, specialized construction company and government contractor.
“I think it's a low-ball offer, but I think they are serious,” said Tahira Afzal, analyst at KeyBanc Capital Markets Inc. in New York. “They are not just trying to push the stock price up to cash out,” Afzal said.
Michael Baker shares closed Thursday at $23.53, up $1.68 or 7.7 percent from Wednesday's close.
DC Capital Partners' offer to take over Michael Baker occurred a week after the struggling company's board pushed CEO Bradley Mallory into resigning. The firm acquired its 5.2 percent stake last July.
In its offer letter, the firm said Michael Baker's acquisition strategy was not working and that the stock was undervalued.
“I think (the offer) is meant to galvanize the board of directors to get more proactive to strategically position the company to address its underperformance,” Afzal said. “But it's difficult to tell how much of the underperformance is tied to the head winds in the market, and how much is due to poor strategic decision-making.”
Smaller struggling engineering firms, such as Michael Baker, have been merging into larger ones, she said. For example, Stantec Inc. in Edmonton, Alberta, Canada, has acquired a half-dozen firms in 2012. Stantec acquired Burt Hill Inc., the Butler-based architectural firm, in September 2010.
A statement from Michael Baker said its board will review the firm's proposal and respond “in due course.” The company has not set a deadline for responding, said spokesman David Higie.
DC Capital Partners CEO Thomas Campbell could not be reached for comment.
Thomas Olson is a staff writer for Trib Total Media. He can be reached a 412-320-7854 or at email@example.com.