November 24, 2024
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Bidder loses shot at EnvisioNet by missing deadline California buyer to pay $10.6 million

BANGOR – Microdyne Outsourcing Inc., the California company that came in second last week in bidding for EnvisioNet Computer Services Inc., is going to be the winner after all.

The Torrance, Calif., company said its competitor, Alorica Inc., was moving too slowly to finish the deal and has taken advantage of a technicality to force Alorica out as buyer.

Microdyne will be purchasing EnvisioNet for about $10.6 million, or $1.2 million less than what Alorica, of Chino, Calif., was willing to spend.

Microdyne did not forget about EnvisioNet after it lost out to Alorica during an 11-hour bidding war on Aug. 20. During the days that followed, it watched as a deadline to complete the deal came and went without an actual contract for U.S. Bankruptcy Court Chief Judge James B. Haines Jr. to sign.

Alorica had set Aug. 22 as the deadline to complete the deal or it was off. Haines agreed to that stipulation in his acceptance of Alorica’s bid. No contract had been signed by Monday night, Aug. 27.

Aware of that stipulation, Microdyne on Tuesday asked Haines to declare it EnvisioNet’s buyer. In a special hearing later in the day, Haines told Alorica its offer was voided, and then named Microdyne as the new owner.

Microdyne has a couple of days to finalize a purchase agreement. It is not known what will happen if the deal is not completed, but it’s likely the judge would consider new bids.

EnvisioNet, however, is not worried about the week ending without a signed contract.

“I expect it will close,” said spokesman Anthony Citrano.

In a memo circulated to EnvisioNet employees Tuesday evening, company founder Heather Blease gave employees “a quick update … right from the courtroom.”

“The Alorica acquisition was not completed by the deadlines offered in the bidding procedures,” Blease wrote. “Therefore … the court approved an order to have the backup bid from Microdyne closed by the end of the week. We will keep you updated as new information emerges. Once again, thank you so much for your patience and support.”

What Blease’s role will be under the new ownership is not known.

EnvisioNet started seeking a buyer in June after it was forced to file for Chapter 11 bankruptcy protection because of a significant reduction in call volume. EnvisioNet employees handle tech support calls from customers using Microsoft Network or Dell Computer software applications.

In May, Microsoft told EnvisioNet that it was cutting by half its call-volume forecasts. A couple of days later, EnvisioNet announced it was laying off more than 600 people and closing its Brunswick office. Earlier this year, EnvisioNet had nearly 2,200 employees.

The company now employs about 1,000 people in its offices in Orono and Augusta. Until June, EnvisioNet had annual revenues of $30 million, and assets of $15 million.

Under its offer, Microdyne has agreed to pay about $6 million in cash, $1.6 million for the assumption of equipment leases, and $3 million in earnouts or payments over time for the work being done by employees.

The up-front cash is more than what Alorica was willing to spend, which was $3.9 million. Alorica’s total bid was $11.8 million.

Microdyne has indicated that it expects to continue employing EnvisioNet’s workers.

What is not in Microdyne’s offer is a payment to assume the lease on the Orono facility. The Orono Economic Development Committee has loaned EnvisioNet more than $7.3 million – $5.3 million in a lease on a facility it built for EnvisioNet to use, and $2 million in loans to purchase equipment.

Alorica was going to pay at least $300,000 to take over the facility lease and pay overdue rent, plus give back to EnvisioNet the more than $550,000 deposit it gave Orono to use to pay its rent for a year if it vacated the building.

Jack Manheimer, an attorney for the OEDC, said he liked Alorica’s offer because it would have given the town some money.

“The Alorica deal provided a measure of certainty on a going-forward basis,” Manheimer said. “The Microdyne deal does not.”

Now Manheimer and Microdyne’s attorney will need to negotiate terms for Microdyne to use the Orono facility. Starting Thursday, Microdyne will sublease the building from EnvisioNet. Between then and Oct. 12, the companies will decide whether Microdyne will assume the lease, renegotiate it with OEDC, or terminate it, Manheimer said.

Most of EnvisioNet’s creditors, however, like Microdyne’s offer over Alorica’s because of the up-front cash, said Robert Keach, an attorney for the creditors.

During the last week, Alorica and EnvisioNet were negotiating the language of the purchase agreement, but not the actual terms of the deal that had been approved by Haines.

“They weren’t changing numbers, they were changing language,” Citrano said.

In the end, however, revisions in the earnout formula were being disputed, especially by Keach, because it affected how creditors were going to be paid back.

Microdyne was established in 1991 to give technical support for hardware and software products, and expanded to integrated product repair. In 1998, it was purchased by L-3 Communications (NYSE: LLL), a $2 billion service-oriented company with 15,000 employees. Its customers include the Department of Defense, selected government intelligence agencies, major aerospace and defense prime contractors, foreign governments and commercial customers, according to Microdyne’s Web site.


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