Repositioning Business into Two Segments Focused on Distribution and MRO Services Supporting Global Aviation and Fleet Aftermarket Customers

VSE Corporation (NASDAQ: VSEC; “VSE”, or the “Company”), a leading provider of aftermarket distribution and maintenance, repair and overhaul (“MRO”) services for air, land and sea transportation assets for commercial and government markets, announced today that the Company has entered into a definitive agreement to sell its Federal and Defense segment (“FDS”) to Bernhard Capital Partners (“BCP”) for up to $100 million in total cash consideration.

VSE’s decision to sell the business segment concludes a comprehensive strategic review undertaken by the management team and board of directors in response to market and business dynamics. The sale of FDS to BCP is intended to allow VSE to:

• Form a 100% pure-play aftermarket business.
• Simplify VSE into two segments supporting Aviation and Fleet distribution and MRO capabilities.
• Tailor capital allocation strategies to high-growth Aviation and Fleet segments, to drive long-term shareholder value.
• Deepen operational focus, accountability, and agility to meet customer needs.
• Create a distinct and compelling aftermarket services investment profile, appealing to a broader and deeper investor base.

MANAGEMENT COMMENTARY

“Today’s announcement represents a significant milestone in VSE’s transformation to a premier aftermarket product and services company. The sale of our Federal and Defense segment transforms VSE’s portfolio by simplifying our operations and focusing our resources on high-growth, high-margin business opportunities, while improving our growth and profitability profile,” stated John Cuomo, President and CEO of VSE Corporation. “In addition to simplifying our operations, the divestiture of the business segment will increase our exposure to the attractive aviation and fleet aftermarkets and provide additional opportunities for VSE to invest and grow in areas of strategic focus.”

Mr. Cuomo continued, “We are pleased to have found our Federal and Defense business a new home with BCP, a high-quality, private equity sponsor that will enhance the business strategy and build on a 63-year rich history of government and defense mission-critical support. I want to express my deepest appreciation to our FDS employees for their outstanding work and extraordinary dedication over the years in building the FDS brand and serving our loyal clients. I am confident that FDS will have a strong owner in BCP, and I look forward to working with their team to ensure a smooth, successful transition for our employees and clients.”

“We are excited to acquire the Federal and Defense business from VSE Corporation,” stated Thomas Henley, Managing Director at Bernhard Capital Partners. “VSE’s Federal and Defense business is a quality organization with a long history of strong mission-critical client performance, an experienced leadership team, and longstanding partnerships that will serve as a strong platform for profitable growth. BCP will bring additional focus and resources to support the FDS leadership team as it broadens its customer base and expands its offerings to support new programs to benefit all FDS stakeholders.”

TRANSACTION OVERVIEW

VSE Corporation entered into a definitive agreement to sell its FDS business to BCP. The business is anticipated to be sold for a total cash consideration of up to $100 million. This assumes a $50 million cash payment and an earn-out payment of up to $50 million, subject to the achievement of certain milestones. The transaction is expected to close in late 2023 to early 2024 and is subject to customary closing conditions and approvals. The Company currently intends to use the net proceeds from the transaction primarily to reduce borrowings and execute strategic acquisitions.

ADVISORS

Jones Day served as legal counsel and Jefferies LLC served as exclusive financial advisor to VSE Corporation.

ABOUT VSE CORPORATION

VSE is a leading provider of aftermarket distribution and repair services for air, land and sea transportation assets for commercial and government markets. Core services include MRO services, parts distribution, supply chain management and logistics, engineering support, and consulting and training services for global commercial, federal, military and defense customers. For additional information regarding VSE’s services and products, visit www.vsecorp.com.

ABOUT BERNHARD CAPITAL PARTNERS

Bernhard Capital Partners is a services and infrastructure-focused private equity management firm established in 2013. Bernhard Capital Partners has deployed capital in four funds across several strategies, has approximately $3.0 billion of gross assets under management, and is ranked as one of Private Equity International's 300 largest private equity firms worldwide. Bernhard Capital Partners seeks to create sustainable value by leveraging its experience in acquiring, operating and growing services and infrastructure businesses. For more information, visit www.BernhardCapital.com.

FORWARD-LOOKING STATEMENTS

This press release contains statements relating to future business opportunities and conditions, as well as the expected timing of the FDS disposition, the anticipated benefits of the FDS disposition and the use of the proceeds therefrom, the anticipated benefits of the strategic repositioning of the Company and expected contributions of the FDS disposition and the related strategic repositioning to the Company’s future financial results. These forward-looking statements, which are included in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, may involve known and unknown risks, uncertainties and other factors that may cause VSE’s actual results and performance in future periods to be materially different from any future results or performance suggested by the forward-looking statements in this document. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that actual results will not differ materially from these expectations. “Forward-looking” statements, as such term is defined by the SEC in its rules, regulations and releases, represent our expectations or beliefs, including, but not limited to, statements concerning our operations, economic performance, financial condition, the impact of widespread health developments, such as the ongoing COVID-19 outbreak, the health and economic impact thereof, and the governmental, including federal contractor vaccine mandates, commercial, consumer and other responses thereto, growth and acquisition strategies, investments and future operational plans. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “forecast,” “seek,” “plan,” “predict,” “project,” “could,” “estimate,” “might,” “continue,” “seeking” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including, but not limited to, our ability to execute upon our strategic repositioning of the Company, whether and when the required regulatory approvals for the FDS disposition will be obtained, whether and when the closing conditions will be satisfied and whether and when the FDS disposition will close, and the risks associated with strategic acquisitions and divestitures, including our ability to successfully integrate recently acquired businesses, risk related to the performance of the aviation aftermarket, global economic and political conditions, prolonged periods of inflation and our ability to mitigate the impact thereof, our dependence on third-party package delivery companies, risks related to technology security and cyber-attack, risks related to our outstanding indebtedness, and the other factors identified in our reports filed with the SEC including our Annual Report on Form 10-K for the year ended December 31, 2022. All forward-looking statements made herein are qualified by these cautionary statements and risk factors and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. Readers are cautioned not to place undue reliance on these forward-looking-statements, which reflect management’s analysis only as of the date hereof. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230501005592/en/