FTI Consulting Inc. completes purchase of PwC division

$250 million deal adds national muscle to Annapolis company

September 04, 2002|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

FTI Consulting Inc. of Annapolis said yesterday that it had completed the $250.1 million purchase of PricewaterhouseCoopers' bankruptcy, turnaround and business restructuring services division based in New York.

The deal brings Pricewaterhouse's U.S. Business Recovery Services Division (BRS) into FTI's fast-growing financial consulting practice. FTI is absorbing more than 350 employees in 15 offices, including Dallas, Los Angeles, Chicago and Atlanta as well as New York.

FTI purchased the PricewaterhouseCoopers (PwC) division for $143 million and 3 million shares of FTI stock, valued at $107.1 million at yesterday's close on the New York Stock Exchange. FTI's shares fell 72 cents to $35.70.

FTI used $24 million of its cash, took out a $74 million loan and tapped $45 million of a new $100 million revolving credit line to pay the cash portion of the deal. FTI has about 600 employees, with 40 in Annapolis.

Jack B. Dunn IV, FTI's chairman and chief executive officer, said the two businesses have begun to integrate. Extensive meetings have been held with BRS employees, and the companies have figured out the management structure of the combined entities, Dunn said.

"Many of our people have known each other for a long period of time because it is a small community that we operate in," Dunn said.

The combined operations will do business under the FTI name, the company said. Announced in late July, the deal passed Federal Trade Commission scrutiny and closed Friday, Dunn said. The BRS purchase adds more muscle to FTI's financial consulting division, which accounts for about two-thirds of FTI's revenue and is the company's most profitable segment. In the quarter that ended June 30, FTI's profit rose nearly 60 percent to $6.7 million, while revenue was climbing 21 percent to $51.1 million.

FTI is continuing discussions as part of a previously announced plan to sell its Applied Sciences Division, a much smaller segment that investigates accidents for corporate clients, to a group led by that division's president, Glenn A. Baker, Dunn said.

Proceeds from the sale would be used to pay down debt related to the BRS purchase.

Analysts have largely hailed FTI's purchase of the PwC division, saying the company is poised for continued growth because of the recent spate of accounting investigations and complicated bankruptcies. Clients FTI has worked with include Enron Corp. and US Airways Inc.

"Think about what's going on in the world today," said Charlie Strauzer, managing director for White Plains, N.Y.-based CJS Securities, an independent investment research firm. "The need for independent consultants is huge right now. I don't think that's going to wane. ... In every respect, I think [FTI] is in the right place at the right time."

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