NEW YORK U.S. defense consulting company SRA International SRX.N is running a narrow sale process mostly targeted at private equity buyers, people familiar with the matter said.
SRA, which retained Houlihan Lokey to filter buyout interest after several parties approached it about a potential takeover, has offered books to a limited group of suitors and has been doing management presentations with the interested parties, three sources said.
The board of SRA formed a special committee to review offers but SRA Chairman Ernest Volgenau is not on the committee, a fourth source familiar with the matter said.
Shares of SRA rose as much as 15 percent to their highest level since December 2007. The stock closed up 3.5 percent at $27.72 on the New York Stock Exchange on Wednesday, valuing the company at about $1.6 billion.
Volgenau, who controls 70 percent of the company's voting stock, is reluctant to sell to a strategic buyer, particularly prime U.S. contractors that already do much consulting business with the U.S. defense and intelligence communities, these people said.
The founder and chairman wants to ensure that SRA's brand and people would remain important following any potential transaction, and would like to control who is going to buy the company, the three sources said.
"Ernest has built the business, this is home, this is family. So therefore for him, it may not be about getting top dollar," a fifth source familiar with the situation said.
"These (SRA) people would be much more important if they were bought by a non-U.S. company than a U.S. company, and by a financial buyer than a strategic. Clearly there would be much less consolidation," he said.
Britain's Serco Group Plc (SRP.L), whose recent offer for SRA was rejected by the SRA board, remains interested in doing deals in this space, sources said. But it is unclear if Serco would take another run at SRA, one of the sources said on Wednesday.
Serco had offered around $35 per share, valuing the company at about $2 billion, but pulled out of the discussions in mid-January after it could not meet SRA's asking price in the high-$30s per share range, several people told Reuters previously.
Volgenau, a U.S. Air Force and Nuclear Regulatory Commission veteran, founded SRA in 1978. The company, which provides command, control and communications systems for defense and military service organizations, went public in 2002.
SRA and Serco were not immediately available for comment.
The sources asked not to be named because they were not authorized to speak publicly about the company.
SRA has drawn potential takeover interest from buyout firms including Providence Equity, General Atlantic, Veritas Capital, Carlyle Group CYL.UL, Bain Capital and Blackstone Group (BX.N), a source said previously.
Some private equity firms have formed consortia to look at the company, two of the sources said on Wednesday.
SRA and other companies offering federal information technology services have drawn buyout interest as the U.S. government cuts spending on traditional weapons platforms while beefing up intelligence and surveillance presence.
Providence Equity, General Atlantic and Veritas Capital are already active in federal IT services.
Veritas bought Enterprise Integration Group, a business that advises government agencies on weapons platforms, from Lockheed Martin Corp (LMT.N) for $815 million in October.
A group led by General Atlantic and KKR bought TASC advisory services for $1.65 billion from Northrop Grumman Corp (NOC.N) in 2009. Providence, which owns security services company Altegrity, hired former SRA Chief Executive Renato DiPentima as a senior adviser in 2010.
(Reporting by Soyoung Kim and Nadia Damouni; Editing by Richard Chang, Phil Berlowitz)