Buying Blackwater: Private Equity snaps up Xe Services as Founder Prince quit

USTC Holdings, LLC, an investor consortium led by private equity firms Fort? Capital Advisors and Manhattan Partners, announced yesterday that it has acquired Xe Services, LLC. Xe was formerly Blackwater Worldwide and played a substantial and controversial role during the Iraq War, as a contractor for the US government. Core operating subsidiaries of Xe are also included in the sale, though terms of the deal have not been disclosed. Xe provides training and technical services focused on worldwide diplomatic security operations.

As part of the transaction, USTC Holdings will acquire the Xe companies that provide domestic and international training, as well as security services. This will include the Company’s training facility in Moyock, North Carolina, which is widely regarded as the preeminent training facility in the world and is unmatched in the quality and scope of the training services provided. Over 50,000 US government personnel have been trained at the facility as well as numerous allied forces.

Jason DeYonker, Managing Partner of Fort?, said: “Xe provides indispensable training and expertise to government and commercial entities around the world. I have a deep appreciation and respect for the quality of Xe’s employees and the valuable services they provide our country. We look forward to partnering with management to realize our collective vision for Xe’s future.”

Mr DeYonker has unique experience with the Company that dates back to its founding in the late 1990s. He advised the Company through development of its early business plan and expansion of the Moyock training facility, as well as supporting negotiations of its first training contracts with US government agencies. Between 1998 and 2002, Mr DeYonker co-managed the family office of Xe founder Erik Prince, which included management of Mr Prince’s portfolio companies.

Prince to Quit

Mr Prince, the sole selling owner and member is to divest the entirety of his equity stake through the transaction and will not be involved in the management or operation of the Company going forward. The Company will now be managed by a Board appointed by the equity owners which will include independent, unaffiliated directors.

Mr DeYonker added: “The future of this industry belongs to those companies with the highest standards of governance, transparency and performance. Our vision for Xe is to set the bar against which all other companies in our industry are measured.”

An Absolutely Unique Asset

Dean Bosacki, Managing Partner of Manhattan said: “Xe is an absolutely unique asset and is recognized as ‘best in class’ by many of the Company’s elite customers. We are excited to complement the Company’s management team who are committed to professionalism and ethical conduct wherever the Company operates.”

This change of ownership does not affect the previously announced Consent Agreement between Xe and the US Department of State’s Directorate of Defense Trade Controls. As part of the agreement, Wendy Wysong, a Partner at Clifford Chance LLP, will continue to serve as Special Compliance Officer for the Company and will oversee the export compliance program at Xe.

Bingham McCutchen acted as legal counsel to USTC Holdings and the Chertoff Group in collaboration with Avascent Group performed strategic due diligence on USTC Holdings’ behalf. Financing for the transaction was led by Bank of America Merrill Lynch.

Global Stability Services Provider

Xe describe themselves as a “global stability services provider”. Founded in 1997 as Blackwater USA, the Company has grown from a basic training facility to support the needs of local and regional law enforcement personnel to a world-class provider of training and security services to public and private entities worldwide. Xe’s headquarters in Moyock, North Carolina house the largest private training center in the US. The former name of Blackwater apparently arose as a result of the color of water found in the Company’s original training facility, located in North Carolina’s Great Dismal Swamp.

USTC Holdings

USTC Holdings has been formed by Fort? Capital Advisors and Manhattan Partners for the sole purpose of facilitating the acquisition of Xe and its core operating subsidiaries.