Tuesday, November 16, 1999
Kroll-O'Gara Co. agrees to buyout
Deal will take company private
BY MIKE BOYER
The Cincinnati Enquirer
Kroll-O'Gara Co., the Fairfield security and investigations firm whose own boardroom intrigue lately overshadowed its detective work for corporate clients, has agreed to be purchased by a private investment banking firm.
The company, created in the 1997 merger of Fairfield vehicle armorer O'Gara Co. and Kroll Associates, an international detective agency, will be sold to Blackstone Capital Partners III, a $4 billion private equity fund managed by the New York City-based Blackstone Group. The purchase price is $475 million.
Blackstone will pay $18 a share in cash for most of Kroll-O'Gara's 22.2 million outstanding shares and assume Kroll debt. Jules Kroll, founder of Kroll Associates, will remain chairman and chief executive. He and other key executives will retain about 10 percent of the company's stock.
The deal, which still must be approved by shareholders, will remove Kroll-O'Gara as a publicly traded company in the fast-
growing area of corporate investigations and risk mitigation. It will have little effect on the company's Fairfield operation, which employs 280, officials said.
The Fairfield plant is the home of O'Gara-Hess & Eisenhardt Armoring Co., the century-old carriage maker that has produced armored limousines for every U.S. president since Harry Truman.
Also, brothers Tom and Bill O'Gara, who took the O'Gara Co. public in 1996, will no longer be involved in the company's ownership and management, although the company will continue to bear their name.
Shares of Kroll-O'Gara, touted as one of the nation's fastest-growing companies last spring by Business Week, plunged $11.50 a share on Sept. 24 when the company said it had hired the investment firm of Bear Stearns & Co. to evaluate selling the business.
That move came amid reports of a falling-out between Mr. Kroll and Tom O'Gara after Mr. O'Gara reportedly made an unsuccessful attempt to oust Mr. Kroll as chairman.
Monday, Mr. Kroll played down any differences with the O'Gara brothers.
“It had little to do with personalities and more to do with trying to run a company with split corporate headquarters” between New York and Fairfield, he said.
Kroll-O'Gara's small corporate office in Fairfield, which employed fewer than a half-dozen people, will be phased out and the company's corporate functions consolidated in New York.
“Both the O'Garas are outstanding businesspeople. They started out as friends of mine,” Mr. Kroll said. “And they are still friends. I have great respect for both men and what they've grown.”
Mr. Kroll said ownership by the Blackstone Group will give the company access to the capital it needs to expand and fund further acquisitions in the security field.
“As the leading risk-mitigation company in the world, we need a lot of capital,” he said. The ability to raise that money and still produce returns for shareholders was difficult as a public company, he said.
He said private ownership would also benefit the company's Fairfield-based vehicle armoring operations. “I'm very excited about that business,” he said.
Kroll's senior management will include:
• Michael J. Lennon, president of the Fairfield-based security products and services group.
• Michael G. Cherkasky, president of the investigations and intelligence group in New York.
• Taher Elgamal, president of the information security group in California.
“Blackstone's financial support and extensive global relationships combined with the expertise of our management team will allow Kroll-O'Gara to continue to build on the key platforms that have made our company an unequivocal leader,” Mr. Kroll said.
Kroll's shares closed Monday at $15.933/4, up $1.121/2.
Brian W. Ruttenbur, an analyst with SunTrust Equitable Securities, said the purchase price, which represented a 22 percent premium over the stock's closing price last week, seemed fair.
“In the near term, I think this is best for all shareholders. In the long term, Kroll-O'Gara should be a strong, viable company. I'd love to see them public again,” he said.
Investment banks such as Blackstone typically acquire a company, expand it and then look to sell or spin it off in a public offering after several years.
For the third quarter ended Sept. 30, Kroll said Monday that it had net income, including discontinued operations, of $3.7 million, or 16 cents a share, vs. $5.3 million, or 24 cents a share, a year ago.
Sales increased to $81 million from $70.5 million a year ago.
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