URS to be sold to smaller firm for $4B

The Associated PressJuly 13, 2014 

Engineering design company Aecom Technology Corp. says it will buy the larger URS Corp. for $4 billion in cash and stock, placing a surviving piece of Boise's former Morrison-Knudsen Corp. under its third new owner since MK went bankrupt 18 years ago.

Aecom, based in Los Angeles, said it will increase its debt to buy San Francisco-based URS for about $56.31 per URS share. The price is 8 percent above URS's closing stock price of $52.02 on Friday, when shares rose on news of a possible sale, but is 19 percent above the average price for the last 30 days.

URS has agreed to the sale. The impact on URS’s Idaho employees was not immediately known. Both companies declined to comment Monday beyond their joint news release, which said Aecom expects to find $250 million a year in “synergy” savings by September 2016 but said nothing about how.

Morrison-Knudsen was a 20th century Boise construction giant that fell on hard times and filed for bankruptcy in 1996. Montana billionaire Dennis Washington assumed its chairmanship and in 2000 renamed the company Washington Group International. URS bought Washington Group in 2007 and still employs several hundred people in its Energy and Construction unit at Washington Group Plaza, the former MK headquarters complex at 720 Park Blvd.

URS has said the Washington Group purchase improved its ability to offer engineering and construction services throughout project life cycles, from planning, design and engineering through construction to operations and maintenance, decommissioning and closure. The Washington Group purchase expanded URS's capabilities in the power and nuclear management markets, transportation, mining, defense and industrial infrastructure.

URS is also part of the team of private contractors who manage the Idaho National Laboratory near Idaho Falls. URS helps manage the U.S. Department of Energy’s nuclear-waste treatment facility there, along with the lab’s environmental cleanup.

Aecom and URS said the combination is necessary to building an integrated infrastructure services company that can operate globally and provide services including design, financing, construction and operation of buildings. The combined firm will be headquartered in Los Angeles. The companies had worked together on projects such as the Barclays Center in Brooklyn and the World Trade Center in New York, which Aecom is building.

Aecom CEO Michael Burke said the deal will give Aecom a broader portfolio of services and access to URS' strong client relationships in the oil and gas, power and government-services sectors. The combined business will be the largest public company based in Los Angeles, Aecom said.

Aecom has 45,000 employees and URS 50,000 worldwide. The combined company would have had revenue above $19 billion last year, with $8 billion from Aecom and $11 billion from URS. The combined company's earnings earnings before interest, taxes, depreciation and amortization would have been $1.3 billion.

"This combination creates an industry leader with the ability to deliver more capabilities from a broad global platform to reach more clients in more industry end markets," said Michael S. Burke, AECOM president and chief executive.

Burke will be the CEO of the combined company, and Aecom Executive Chairman John Dionisio will lead the combined board.

URS has been involved in the building of the Fred Hartman Bridge, which spans the Houston Ship Channel in Texas, and the renovation of the National Archives Building in Washington. It was among the companies most affected by the 2013 U.S. government shutdown, with 3,000 workers on furlough.

“Our two businesses are complementary, and our cultures are highly compatible," said URS's 75-year-old chairman and CEO, Martin M. Koffel. "We anticipate that employees from the combined company will benefit as the organization integrates its leadership talent and capitalizes on its greater scale to invest in its people, improve their career opportunities and advance their capacity to compete globally.”

The transaction is expected to be completed in October. Aecom expects the deal to boost its total debt to $5.2 billion, up from $1.1 billion at the end of March. It plans to use free cash flow to pay it down over time.

Aecom expects annual cost savings of $250 million by September 2016. The deal is expected to boost per-share net income in the year through September 2015.

The offer includes $33 per share in cash and 0.734 Aecom shares for every URS share.

URS CEO Martin Koffel said in a conference call the deal gives its shareholders "a right on the future as well as a cash takeout."

Shareholders can elect to receive all cash or all stock, although stock proceeds are expected to be tax-free, the companies said.

URS shares closed Monday at $58.40, up $6.38. Aecom closed at $34.98, up $3.22.

The Idaho Statesman, Bloomberg News and the Los Angeles Times contributed.

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