Case Study

Tracor (Financial Opinion)

CLIENT: Tracor, Inc. ("Tracor")

Gordian Group rendered several financial opinions to the Company including with respect to fairness, solvency and valuation.

Business Profiles

Situation

Tracor was a company with $1 billion in sales, virtually all of which was defense-related. Shortly after a buyout in the early 1990s, Tracor went bust with more than $1 billion in debt.

Engagement

In addition to advising the Company in connection with its restructuring, Gordian was also was engaged to render several financial opinions, including:

  • Fairness Opinion in connection with Tracor’s acquisition of Westmark Systems: When Tracor emerged from bankruptcy, Westmark (the former equity owner) received 10% of Tracor’s common stock and a block of common stock warrants, resulting in a fully diluted equity ownership position of approximately 40% of Tracor. Gordian initiated Tracor’s acquisition of Westmark, and assisted Tracor in the negotiation of the terms of the acquisition, in which Westmark received common shares of Tracor. Key to the terms of the exchange was valuation of the warrants through (i) comparison with other “in-the-money” publicly-traded warrants, (ii) theoretical warrant pricing models and (iii) various hypothetical scenarios valuing the future intrinsic value of the warrants. Gordian delivered a fairness opinion to Tracor’s Board regarding the transaction.
  • Fairness Opinion in connection with Tracor’s acquisition of GDE Corp.: Gordian was engaged to render a fairness opinion to Tracor’s Board in connection with the acquisition. Carlyle Group, the principal owner of GDE, had only recently bought GDE from General Dynamics, and would realize a significant gain on the sale. Moreover, GDE had experienced certain program problems in recent periods. After spending significant time with management of both Tracor and GDE, Gordian was able to conclude that the operating efficiencies that would be achieved due to the acquisition made the transaction fair to Tracor.
  • Gordian also delivered valuation opinions to Tracor in connection with issuance of unregistered stock and in connection with the Company’s emergence from Bankruptcy and a solvency opinion to the Company’s lenders in connection with a critical acquisition financed entirely with debt.