* Providence, Veritas, General Atlantic involved-sources
* KKR initially looked, but since cooled interest-source
* Another set of bids expected in March-sources
* Process moving along despite lingering doubts-sources
(Adds price expectations, details about process)
By Soyoung Kim
NEW YORK, March 9 At least three private equity
firms remain interested in SRA International Inc SRX.N as the
U.S. defense consulting company seeks another set of buyout
offers this month, people familiar with the matter said.
Providence Equity, Veritas Capital and General Atlantic
remain interested in buying SRA, three people said, adding that
the process is ongoing despite lingering doubts about whether
Founder and Chief Executive Ernst Volgenau will eventually be a
Kohlberg Kravis Roberts & Co (KKR.N) also looked at the
company initially but its interest has since cooled, one of
these people said.
"It's been an odd process, a little bit confusing, but
things are still bubbling along," that person said.
SRA shares were up 4.8 percent at $27.31 in early afternoon
on the New York Stock Exchange.
The next round of bids expected around the middle of March
might not necessarily be final as the private equity bidders
are still conducting due diligence on the business, two of the
Some strategic bidders - meaning companies operating in the
same industry as SRA -- initially expressed some interest after
SRA retained Houlihan Lokey earlier this year, but they are not
involved in the current process, these people said.
The sources declined to be identified because details of
the auction are not public. Representatives for SRA and the
private equity firms have declined to comment or were not
immediately available for comment.
It remains unclear whether the ongoing review will result
in a deal, these people said.
Volgenau, who founded SRA in 1978 and controls 70 percent
of its voting stock, had not been interested in selling in the
past and there are also big doubts as to whether any of the
private equity bidders could meet his price expectations.
In January, Volgenau rejected a $35 per share offer from
Britain's Serco Group Plc (SRP.L) that valued SRA at around $2
billion, asking for a price in the high 30s per share range
instead, people familiar with the matter said previously.
None of the private equity bidders is likely to come near
the price offered by Serco, making the likelihood of a deal
hard to predict, sources said.
But Volgenau's priority might not be getting top dollar,
and there is a possibility that he might strike a deal with a
financial buyer of his liking at a lower price, sources have
Volgenau has tried to ensure that any deal would preserve
SRA's brand and people. While strategic bidders generally can
afford to pay more since there are synergies from combining
operations, such mergers can often lead to restructurings.
"The way they've been doing this process, it was clearly
geared to the financial sponsors, not the strategics," another
"The real question is, they're going to have a hard time
getting north of $30. Private equity wants to pay high-20s per
share and maybe $30, but they're not going to pay a lot more,"
that source said.
SRA provides command, control and communications systems
for defense and military service organizations. SRA and other
companies offering federal information technology services have
drawn buyout interest as the U.S. government moves resources
from military hardware to intelligence and surveillance
(Reporting by Soyoung Kim, editing by Gerald E. McCormick)