Eyak Technology, LLC Announces Cash Offer of $7.00 Per Share for GTSI Corp.

DULLES, Va., Sept. 13 /PRNewswire/ -- Eyak Technology, LLC (EyakTek) announced today that it has again made a proposal to the board of directors of GTSI Corp. (Nasdaq: GTSI) to acquire by merger all of the outstanding capital stock of GTSI at a price of $7.00 per share in cash.  The proposal represents a premium of 35.1% over GTSI's closing market price on September 10, 2010 of $5.18 and a premium of 34.6% over the average closing price for the preceding 30 trading days.  

The proposal, which was initially made on August 13, 2010, was reiterated in a letter sent by EyakTek today to GTSI's board of directors (which letter is included at the end of this press release) after several unsuccessful attempts to engage GTSI in substantive negotiations.  GTSI rejected EyakTek's proposal in a letter dated August 30, 2010.

EyakTek intends, following the acquisition, to operate GTSI on a standalone basis, in order to preserve and capitalize on its strong brand name and industry recognition.

EyakTek anticipates financing the transaction with a combination of cash on hand and additional senior debt financing, for which it has a commitment, subject to customary conditions.  Houlihan Lokey is acting as financial advisor to EyakTek and Morrison & Foerster LLP is acting as legal advisor to EyakTek.  

EyakTek is an Alaska Native-owned small business that provides award-winning solutions in infrastructure and security systems, communications, information technology, and healthcare services.  As a recognized leader in the industry, EyakTek has consistently been ranked as one of the Top 100 Federal Contractors.

For information please call Andrea Williams at 703-880-5308 or visit the Company's website at www.eyaktek.com.

Below is the full text of the letter sent by EyakTek to GTSI today:

September 13, 2010

VIA EMAIL AND OVERNIGHT MAIL

Gentlemen:

Let me first thank you for the opportunity to meet with members of your Special Committee on August 30, 2010 to discuss the proposal Eyak Technology, LLC ("EyakTek") made on August 13, 2010 to acquire GTSI Corp. ("GTSI"), and for subsequently making GTSI's financial advisor available to discuss our proposal with EyakTek's financial advisor.  

During those conversations, we presented an opportunity for your stockholders to achieve liquidity for their shares at a substantial premium.  This may be an especially important opportunity for your stockholders given the extreme illiquidity of GTSI's stock.  We believe that continuing those discussions on a confidential basis with a goal of reaching a negotiated agreement would be the most desirable course for everyone involved.  As we indicated during our discussions, we are keenly interested in understanding the Special Committee's underlying rationale on the value of GTSI shares.  We were thus disappointed that you instead chose precipitously to end that dialogue and raise a number of meritless issues regarding GTSI's minority position in EyakTek that raise concerns about their use as a device to deprive GTSI stockholders of the opportunity to independently evaluate and consider our proposal.  Because we believe our proposal to acquire GTSI is one GTSI's stockholders would enthusiastically support, we feel compelled to make its existence public.

As you know, on August 13, EyakTek sent GTSI a letter proposing to acquire all outstanding shares of GTSI for $7.00 per share in cash.  On that date, our proposal represented a premium of 36.5% to GTSI's closing stock price on August 12, 2010 of $5.13 and a 31.3% premium to GTSI's volume weighted average price of $5.33 for the 30 trading days then ended.  As of the date of this letter, our proposal continues to offer exceptional value to GTSI stockholders, representing similar premiums to the current and average trading prices of GTSI's stock.

Based on EyakTek's long relationship with GTSI and our knowledge of the sector, we believe our proposal gives generous credit to the future prospects of GTSI.  In offering GTSI's stockholders a substantial and immediate economic benefit, our proposal represents a unique opportunity for all GTSI stockholders to maximize and realize the value of their investment.  The transaction we propose would constitute a direct realization event for them, as opposed to the speculative benefit that might be achieved by GTSI continuing on a standalone basis or following any alternative transaction.  Even if GTSI were to deliver operational improvements, the ability of its stockholders to realize value in cash would be dependent on an extraordinary corporate transaction, given GTSI's average trading volume of just over 4,000 shares a day.  As fiduciaries, you must recognize that our proposal would enable GTSI stockholders to realize a value for their shares that, given GTSI's current course, is unlikely to be available to them in the marketplace or in the context of another transaction.

We believe that EyakTek's proposal is particularly compelling in light of the strong headwinds GTSI now faces as a result of the company's decision to strongly deemphasize the historical product business and convert the company to a services platform.  Assuming that change in strategy can even be successful (which to date it has been far from), GTSI's own management estimates the company will likely not achieve the goal it has set for the new business model until 2014 at the earliest.  In fact, GTSI's predicament would be considerably worse were it not for the fact of EyakTek's own success, since GTSI's underperformance has been so significantly offset by its equity interest in EyakTek.

We are also acutely aware of the sweeping changes that have occurred in the defense procurement and services industry, and the need to constantly adapt to those changes.  Our industry's recent history is littered with companies that have failed to respond to the changing requirements of the marketplace.  We believe that our operational expertise, coupled with the strategic benefits of a rationalized business plan leveraging the company's enhanced capabilities and reach, would finally allow GTSI to achieve its potential.  In our August 30 meeting and subsequent discussions, we explored a wide range of topics, all of which lead to the conclusion that, given the complimentary nature of our two companies, the merits of a strategic transaction are compelling.  

As we indicated in our August 13 letter, we anticipate financing the transaction contemplated by our proposal with a combination of cash on hand and additional senior debt financing, with respect to which we have a commitment, subject to customary conditions, for the entirety of the additional funds we will require to consummate the transaction.  

We recognize that you must consider what alternatives, if any, may be available to GTSI and its stockholders, and understand that you may wish to solicit other acquisition proposals or explore other strategic alternatives.  While we are confident that our proposal will prove to be the most advantageous to GTSI, its stockholders and its other constituencies, we support you in that process as a way to ensure the best outcome for GTSI's stockholders.  To address any concerns you may have in that regard, we would anticipate that the definitive agreement for a transaction with EyakTek would contain a "go-shop" provision permitting you to solicit alternative offers to acquire GTSI.  This structure has been used by many public boards of directors and we propose that the definitive agreement for our transaction contain the same "go-shop" structure as was recently adopted by the board of directors of your industry peer, DynCorp International Inc., in its agreement to be acquired by Cerberus Capital Management.

We are very enthusiastic about the mutual benefits of a transaction between our two companies and believe that you should be as well.  Our objective continues to be a negotiated transaction that is supported by you, as well as your stockholders and other stakeholders.  We and our advisors remain ready to reengage with your representatives, so as to promptly move forward with discussions of a definitive agreement and begin our joint effort to create the successful enterprise you and I discussed.  I trust you would agree that it is in the best interests of all GTSI stockholders for you to return to the negotiating table and explore our proposal more fully.  

I am sure you appreciate the seriousness of EyakTek's proposal.  Because of its importance to both of our companies, I look forward to your earliest possible response.  I hope that you will now give our proposal additional consideration.  Indeed, we believe you will determine you have a fiduciary obligation to do so.  Because of that, I remain convinced that, once you have undertaken a further review of our proposal, you will share in our vision and will choose to act in the best interests of your stockholders.  

Sincerely,

SOURCE Eyak Technology, LLC

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