Both AECOM and the investment group planning to buy its government contracting business could call off the deal if it takes too long to complete, according to a recent financial filing.
AECOM plans to sell its Management Services business to Maverick Purchaser Sub LLC, a joint venture formed by investment firms American Securities and Lindsay Goldberg, under an Oct. 12 purchase deal valued at roughly $2.4 billion. The sale is due to close by late January.
But both parties retain the right to terminate the deal if it has not closed by Feb. 12, though the deadline could be extended to April 12 if they are still awaiting government regulatory approvals. The purchaser could pay AECOM a termination fee of $141 million if the deal falls through, according to the 8-K financial disclosure report AECOM filed on Oct. 17 with the U.S. Securities and Exchange Commission (SEC).
The termination fee option is a fairly common clause in contracts to encourage parties not to drag their feet on closing an agreement, a source said.
The deal is subject to the customary closing requirements for large corporate transactions, including the 1976 Hart-Scott-Rodino Antitrust Improvements Act, as amended — which typically requires paperwork be filed with the Federal Trade Commission and Department of Justice, followed by a 30-day waiting period. The companies will also need antitrust approval in the European Union “and the absence of any judgment or law preventing or prohibiting the closing,” the SEC filing says.
The agreement says the buyer will stop using the AECOM name on anything from stationary to websites within six months of closing.
There is probably a lot of stationary to be changed for AECOM and its joint ventures that contract with the U.S. Department of Energy. AECOM leads a joint venture operating the Waste Isolation Pilot Plant (WIPP) near Carlsbad, N.M., and another AECOM-headed partnership is in charge of remediation at the Oak Ridge Site in Tennessee. The company leads contractors handling radioactive waste management at the Savannah River Site in South Carolina and Hanford Site in Washington state.
AECOM says its Management Services group currently employs about 25,000 people and generates roughly $4 billion in annual revenue. The group brought in more than $1 billion during its second quarter for fiscal 2019, or roughly 20% of AECOM’s total revenue for the three-month stretch. One year earlier the group generated $897.8 million
The Los Angeles-based engineering and construction giant announced the sale Oct. 14. The company decided to sell Management Services directly rather than following through with its June plan to spin it off via an initial public offering.
The financial filing says the buyer would pay AECOM up to 90% of any financial recovery it receives from DOE over a dispute over cleanup of a nuclear site in New York state.
AECOM has finished remediation of the Separations Process Research Unit (SPRU). The company remains in dispute resolution with the Energy Department over primary responsibility for schedule delays and cost overruns at the former nuclear research site at the Knolls Atomic Power Laboratory. The lab itself remains active, supporting the joint DOE-Navy Naval Nuclear Propulsion Program.
Between 1949 and 1951, SPRU was home to a pilot plant for researching and proving the chemical separation of plutonium from irradiated fuel. The SPRU facilities were decommissioned in 1953.
in December 2007 AECOM started work on a $146 million completion contract. The Energy Department said earlier this year that physical remediation at the site is essentially done and the buildings have been demolished.
The parties have argued about which side should shoulder most of the additional cost following a 2010 radiological release and 2011 hurricane that delayed work by 16 months. AECOM said in 2018 its total cost at project completion was expected to hit $460 million, but DOE had yet to reimburse $250 million in expenses.
