Edgewater Funds Closes Sale of Westar
The Edgewater Funds, a Chicago based private equity group with approximately $540 million under management, today closed the exit of its investment in Westar Aerospace and Defense Group, Inc. Westar, a leading provider of technology solutions to the Department of Defense, other government agencies, and aerospace customers, was acquired for approximately $130 million by QinetiQ Ltd., a British science and technology development company controlled by the Carlyle Group.
Westar provides systems engineering, software, and logistics services to the aerospace industry, primarily the US department of defense. In addition, Westar manufactures aerospace filtration systems and flat panel display capital equipment. The company reached trailing twelve month revenue of approximately $125 million at June 30, 2004.
Under terms of the agreement, Westar will become a wholly owned subsidiary of QinetiQ North America, QinetiQ’s U.S. operating company, and will remain an autonomous member of the QinetiQ Group, retaining Westar’s core management team, employees, and U.S. facilities. Westar’s management will continue to report to a separate, independent board of directors.
“We’re very proud of our role in fostering Westar’s growth and success,” noted Edgewater Partner Greg Jones. “With assistance from Edgewater, Westar President and COO Rob Topping and his management team were able to build a large amount of value in a relatively short period of time.”
“This transaction will allow shareholders to realize an excellent return on their investment while positioning Westar for continued growth. QinetiQ is buying an outstanding company and will provide Westar with additional resources to move forward. This combination will bring helpful new capabilities to the U.S. Military. This is a great new chapter in the company’s history,” added Jones.
“Our investment in Westar exemplifies Edgewater’s strategy of partnering with strong management teams to create growth and value,” commented Jeff Frient, a Principal at Edgewater. “The Westar team, working with Edgewater, has grown the company’s revenue and profitability significantly and established Westar as a leader in the defense engineering services sector.”
Edgewater made its original investment in Westar in December, 2003.
Headquartered in St. Louis with offices in Washington, D.C. and Huntsville, Ala., Westar Aerospace & Defense Group, Inc. and its operating subsidiaries (Aerospace Filtration Systems, Inc., which produces products that extend the lives of turbine engines; and Westar Display Technologies, Inc., a supplier of image quality measurement and display performance improvement products), currently have approximately 900 employees and approximately $125 million in annual revenue. Founded in 1986, Westar has substantial expertise and a proven track record, offering synergistic, broad-based modeling and simulation, systems engineering, IT, and programmatic and logistics solutions. Visit http://www.westar.com for further information.
QinetiQ is Europe’s largest science and technology solutions company, employing more than 9,000, including many of the UK’s leading scientists and internationally acclaimed experts. Founded from the laboratories of the UK Ministry of Defense, QinetiQ operates in markets as diverse as information technology, telecommunications, electronics, marine, energy, automotive, rail, defense, space, health, oil & gas, and aerospace. QinetiQ’s extensive facilities include indoor and outdoor ranges, wind tunnels, marine testing facilities, automotive test tracks, and climatic testing laboratories. The company is 31% owned by Washington, DC based Carlyle Group and 56% by the UK government. Visit http://www.QinetiQ.com for further information.
Rob Topping, president and chief operating officer of Westar Corp., is fortifying the defense contractor’s St. Charles County operations.
He is expanding the company’s newly designated headquarters, consolidating top management here, acquiring two other companies and projecting 2004 revenue will double last year’s total.
During the past few months, Topping has officially relocated the company’s headquarters from Albuquerque, N.M., to Westar’s offices in Missouri Research Park. Three senior managers, including Frederick Meek, director of human resources, are relocating from New Mexico.
In addition, Joe Pruett was just hired from WebMD in Florida for the newly created vice president of finance position. Topping also hired Vanessa Chandler, a lawyer with Bryan Cave’s Washington, D.C., office, as Westar’s general counsel and vice president. She also is relocating to St. Charles.
Although the company has maintained key offices in St. Charles County for more than 13 years, the headquarters relocation will set up greater synergy by combining the staff and leadership team in one place, Topping said.
In addition, Westar is hiring 20 employees for its human resources, accounting, finance and contracts departments.
“Compared to Albuquerque, this region has much richer talent pools,” Topping said. “There is such an emphasis on higher education. We have been conducting about eight interviews a day for the past three weeks.”
Topping expects to break ground within the next 30 days on a $2 million, 20,000-square-foot expansion to Westar’s current 40,000-square-foot office. A contractor has not been selected yet, but architects Mark Duitsman and Jack Holleran, who designed the original building, will oversee the expansion.
The company’s current space is a far cry from the 1,200-square-foot Bridgeton office where Westar began in the mid-1980s. “The HVAC didn’t work well, so in the summer we had to work in T-shirts, and in winter we had to work in coats,” Topping said.
The building addition is just one indication of Westar’s rapid growth. Topping and his management team have led three acquisitions since 2000 and are closing in on two more this quarter.
One of the companies, which develops aerospace modeling software, signed a letter of intent in mid-April to be acquired by Westar. Topping said he expects to close the deal this summer.
Acquisition talks are under way with the second company, which develops unmanned aerial vehicle (UAV) technology. Confidentiality agreements prohibit Topping from sharing names and details, but he said each acquisition would cost about $10 million.
Not including the planned acquisitions, Topping projects Westar’s revenue will nearly double to $140 million this year, compared to $77 million in 2003. The company experienced organic growth of 38 percent in 2003 over 2002, and saw its growth through acquisitions increase 78 percent during the same period, Topping said. Revenue for this year’s first quarter was 114 percent higher than the same period in 2003, he said.
Westar’s 2003 revenue has increased 353 percent compared to the $17 million the company made in 1999. “If you’re good, you’re growing fast,” Topping said. “Growth is a sign of success in your market.”
All of these developments are part of Topping’s larger plan to consolidate fragmented elements of the aerospace and defense industry and grow the company to $250 million in revenue by the end of 2005.
Westar is privately held, but Doug Childress, chief financial officer, told the Business Journal in December that executives are considering taking the company public by 2005.
Westar will pay for the upcoming acquisitions with part of the $38 million in equity and debt financing it secured Dec. 11 from the Edgewater Funds with participation by Mesirow Financial’s Private Equity Division, both based in Chicago. Edgewater committed the majority of the equity. Enterprise Bank of St. Louis provided the balance in a term loan and working capital facility.
Westar provides services to the Department of Defense and defense industry customers such as The Boeing Co. and Bell Helicopter. More than 90 percent of the company’s business is with the U.S. military. The company specializes in simulation and modeling, information technology, systems engineering, acquisition program support, and logistics services. It also manufactures engine filtration systems for Army helicopters and sells commercial flat-panel displays.
The company’s aerospace and defense group is focused on engineering systems that coordinate weaponry in “inner-air” battle space where helicopters, UAVs and missiles are used to achieve a military objective, according to the company’s vision statement.
“Training simulation and support is an area the Department of Defense has been focused on in terms of increasing readiness of our armed forces,” said Peter Arment, an aerospace analyst with Newport, R.I.-based JSA Research Inc. “Post 9-11, we’ve seen a step up of readiness training and the contract awards that have been handed out associated with that.”
In December, Westar acquired Huntsville, Ala.-based ELMCO Inc., which designs battlefield and missile-defense simulation programs for the Army. In 2002, Westar bought Brunswick, Maine-based Great Pond Technologies Inc., a business that creates mathematical models that describe the way helicopters operate in various environments. In 2000, Westar acquired Daleville, Ala.-based Cobro Corp., the Army’s contractor for helicopter logistics.
Founded in 1986, Westar employs about 120 people in St. Charles and another 680 in 26 locations around the world.