General Dynamics to buy Anteon

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Caxton-Iseman Capital, a mid-sized US private equity group, completed an extremely lucrative buy-out when it agreed to sell Anteon International, an information technology services provider, to General Dynamics, the defence contractor, for $2.1bn in cash.

After the deal, Caxton-Iseman’s $32.5m investment will have returned more than $700m to the private equity firm, which took Anteon public in 2002 and has since reduced its stake to about 6 per cent.

In recent years, much of the attention in the private equity industry has been centred on the big pay-outs to investors from the largest firms, such as Kohlberg Kravis Roberts, Blackstone and Bain Capital. But below that level, dozens of smaller firms are battling to secure deals such as Caxton-Iseman’s – which has produced a return of more than 20 times the money it invested.

In the late 1990s, Caxton-Iseman joined forces with Joe Kampf, Anteon’s chief executive, to take over the company, at the time a small but promising supplier of IT services to the US government.

Mr Kampf and Anteon’s senior management, which also invested in the company early and will become managers at General Dynamics, are expected to make “hundreds of millions of dollars” as a result of the deal, according to people familiar with the matter.

Since 1996, when Caxton-Iseman took control of Anteon, the company experienced a surge in revenues from about $110m to $1.5bn as it grew organically and pushed through a series of acquisitions. After the initial public offering, Anteon shares rode the wave of soaring valuations in the defence industry, jumping from $18 at the listing to $54.05 in morning trading yesterday, slightly below the $55.50 offered by General Dynamics. The offer represents a 36 per cent premium to Anteon’s closing share price on Thursday.

Fred Iseman, Caxton-Iseman president, said he was “very proud” of the investment and Anteon’s “extraordinary growth.

The deal will rank as the most lucrative in the history of Caxton-Iseman, which has about $2bn under management and was formed in 1993 when Mr Iseman secured the backing of Bruce Kovner, the New York hedge fund manager that owns Caxton Corporation.

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