Kenneth Fletcher
NS&D Monitor
7/18/2014
In a move that could have a significant impact for the Department of Energy marketplace, AECOM Technology Corp. is looking to purchase URS in a deal worth approximately $6 billion. The purchase, announced early this week, would involve AECOM acquiring all outstanding URS shares for $4 billion and assuming about $2 billion in URS debt. AECOM plans to pay $56.31 per share of URS stock, 19 percent higher than URS’ 30-day average closing price. The combined company would be a giant engineering, procurement and construction firm with 95,000 employees in 150 countries with 2013 revenues of more than $19 billion.
URS has a significant presence in the DOE cleanup program, including leading the two liquid waste contractors at Hanford and the Savannah River Site and the managing contractor for the Waste Isolation Pilot Plant. In a call with investors, AECOM Chief Executive Mike Burke said the two companies are looking to complement their reach through the deal. “When we looked at the two companies we certainly saw significant new capabilities and market expertise that would fit well within our organization. More than half of their business is entirely complementary to ours in markets or services that we do not provide today. The URS exposure in oil and gas, power, nuclear and industrial EPC are markets that we are not playing in today,” Burke said. “Their [Department of Energy] end market, which is very significant, is a market that we barely touch today. So when you compare all of the different complimentary services, the strategic rational fit quite well.”
In addition to assuming URS debt, URS CEO Martin Koffel told investors that the deal would have other benefits for the company. “URS will gain an expanded presence in the U.S. and global commercial and public buildings markets,” he said. “AECOM will benefit from our strong sector experience in important end markets including oil and gas, a higher growth market, government services. The combined company will be better positioned in growing global markets.”
Sale Comes After Activist Shareholder Assumed Role on URS Board
Notably, AECOM’s plan to purchase URS comes just months after the activist shareholder firm JANA Partners made a move to add a presence to URS’ board of directors. In March, URS announced that it had reached a deal with JANA Partners, which owns slightly less than 10 percent of the company’s stock, to add four candidates the shareholder proposed to its Board of Directors. URS also agreed to the establishment of a “Value Creation Committee” that was intended to “evaluate all options for enhancing shareholder value, including by engaging an investment bank to conduct a strategic review of the Company’s business segments, operations and capital structure; and reviewing the Company’s management compensation structure to enhance alignment with shareholder value creation,” according to a URS release.
Companies Look to Complete Deal This Fall
AECOM and URS plan to close the deal this October, pending required approvals from shareholders. AECOM’s Burke will be the combined company’s CEO, while AECOM Executive Chairman John Dionisio will be chairman of the board, and the management structure will include executives from both companies and two URS representatives on the Board of Directors. “We’ve got a roster of mature presidents who run very very large divisions and they are coming across to the combined company,” Koffel. “They bring with them considerable integration ability and considerable ability to operate large companies.”
The structure of the combined organization will remain similar to the current structures at both AECOM and URS, Burke said. “We have large geographic footprints and we have large service types, such as our federal services division that is operated independently today, which would be operated independently tomorrow,” he said. “The construction business is separate from the design business, and then you have the design business operated by three major geographies: Asia Pacific, the Americas and then Europe, Middle East and Africa.”
