SAC Capital Now Owns 6.8% of Dyncorp's Common Shares

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In a Form 13D filing entered earlier today, SAC Capital Advisors LP (and their related companies) announced that they now own a 6.8% stake in DCP (Dyncorp International Inc).

This 6.8% stake works out to be a total of 3,807,571 shares.

The shares are spread out over a number of funds that Steven Cohen has direct control over, including:

SAC Capital Associates
SAC Velocity
SAC MultiQuant
CR Intrinsic Investors

The three SAC funds own a total of 3,457,571 shares, while CR Intrinsic Investors owns an additional 350,000 shares. This includes 745,100 shares of common stock receivable upon the call of call options.

Why is this filing interesting?

Well, private equity firm Cerberus Capital announced on April 12th that they would be looking to take DynCorp private in a $1 billion deal. This deal would pay $17.55/share in cash to all DynCorp shareholders.

Veritas Capital Fund Management, which owns 34.9% of the company, agreed to vote their shares in favor of the sale. As part of the announced deal, DynCorp would get up to 28 days to "seek competing bids".

Now, SAC Capital owned 614,689 common shares at the end of the fourth quarter (12/31/2009).

What's interesting is that SAC Capital kept buying even after the proposed deal with Cerberus was announced.

According to the 13D filing, CR Intrinsic Investments bought 250,000 shares on April 12th, 2010 at an average price of $17.47, while SAC Capital Associates bought 1.625 million shares on the same day at an average price of $17.41.

SAC Capital Advisors LP decided to dramatically increase the size of their stake AFTER the deal was announced. Not only that, but they filed a Form 13D, which means that this is not a passive stake (13D filings are used by investors who may be looking to "exert control", or activist shareholders).

What does SAC Capital have in mind here? Will they vote against the proposed deal? Are they hoping that DynCorp receives a higher bid before the 28 day window for competing bids has closed?

It's worth mentioning that a number of other funds owned stakes in Dyncorp as of 12/31/2009. They were:

First Eagle Investment Management LLC - 814,180 shares
AQR Capital Management LLC - 250,760 shares
Bogle Investment Management LP - 50,810 shares
Citadel Advisors LLC - 116,966 shares
Diamondback Capital Management LLC - 15,500 shares
Denali Advisors LLC - 147,700 shares
Adage Capital Partners GP LLC - 1,180,792 shares
Black River Asset Management LLC - 3,700 shares
D.E. Shaw & Co., Inc. - 153,340 shares
Delaware Management Business Trust - 131,642 shares

It's also worth noting that a number of law firms have launched "investigations" into the proposed acquisition by Cerberus, citing a possible breach of fiduciary duty. The investigations will look into whether or not the deal provides adequate value to DynCorp shareholders.

DynCorp is currently trading at $17.17 per share.

Source: SAC Capital Advisors LP Form 13D Filing for Dyncorp

Source: Davemanuel.com - DCP Quote