) has announced its intentions to acquire San Francisco-based
) for about $4 billion or $56.31 per URS share. Slated to close in
Oct 2014, the deal's total enterprise value stands at around $6
billion. Post merger, AECOM is likely to become one of the largest
companies, in terms of revenues, in the engineering and
Per the terms of the deal, URS shareholders will receive per
share consideration of $33.00 in cash and 0.734 shares of AECOM
common stock. Additionally, the shareholders have the alternative
to opt for an all cash or all stock consideration and will be
divided on pro rata basis in case of oversubscription. However, the
election will depend on a customary proration method to achieve a
combined consideration mix of approximately 59% cash and 41% AECOM
Nevertheless, AECOM stockholders will retain their shares
subsequent to the transaction while URS stockholders will own about
35% shares of the combined entity, vesting in them the right to
take business-related decisions.
AECOM has received the Bank of America's approval to debt
finance the transaction, subject to customary conditions. The
proceeds will be used to refinance a portion of the existing AECOM
and URS debt and fund the cash part of the deal. The financing
commitment also includes senior secured credit facilities. On
closure, AECOM will likely have $5.2 billion in total outstanding
The deal price of $56.31 per URS share is at 8.2% premium to its
Friday's closing price of $52.02. In fiscal 2013, both the
companies generated combined revenues of $19 billion with an EBITDA
of $1.3 billion.
AECOM expects this deal to return more than 25% in the very
first year of operations. The company also expects to realize $250
million in annual cost savings and synergies by the end of fiscal
Both URS and AECOM's businesses perfectly complement each other
which will lend the merged unit a broad global reach with an
improved ability to deliver integrated services.
URS Corp. is a leading provider of engineering, construction and
technical services with about 33% of the total revenue being
generated by the Infrastructure & Environment division, 21% by
Federal Services, 26% by Energy & Construction and 20% by Oil
& Gas. Therefore, post the acquisition, AECOM intends to
accelerate its strategy of offering an integrated-delivery model by
adding key capabilities and expertise in markets including
construction, oil & gas, power and government services, given
URS' stronger sector knowledge.
Post-merger, the combined company will be a leading, fully
integrated infrastructure firm, serving clients across a broad
range of markets, including transportation, facilities,
environmental, energy, water and government. The united entity will
be headquartered in Los Angeles with a key operational presence in
San Francisco, where URS is presently based.
AECOM currently has a Zacks Rank #4 (Sell). Some better ranked
stocks in the industry include
Emerson Electric Co
Franklin Electric Inc
). Both carry a Zacks Rank #2 (Buy).
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AECOM TECH CORP (ACM): Free Stock Analysis
URS CORP (URS): Free Stock Analysis Report
EMERSON ELEC CO (EMR): Free Stock Analysis
FRANKLIN ELEC (FELE): Free Stock Analysis
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