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AECOM and URS Corporation yesterday announced the execution of a definitive agreement under which AECOM will acquire all outstanding shares of URS for a combination of cash and stock valued at approximately US$4 billion or US$56.31 per URS share, based on the AECOM closing share price as of July 11, 2014. Including the assumption of URS debt, the total enterprise value of the transaction is approximately US$6 billion.
The combined company will be a leading, fully integrated infrastructure and federal services provider with more than 95,000 employees in 150 countries. It would have calendar year 2013 pro forma revenues of more than US$19 billion and EBITDA of approximately US$1.3 billion.
Michael S. Burke, AECOM president and chief executive officer, said:
"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. Clients, employees and stockholders of both companies will benefit from the opportunities created by these expanded capabilities, broad global reach in key growth markets and economies of scale. In one step, we will dramatically accelerate our strategy of creating an integrated delivery platform with superior capabilities to design, build, finance and operate infrastructure assets around the world."
Martin M. Koffel, chairman and chief executive officer of URS, stated:
"This is a compelling strategic combination that we believe will benefit our clients, stockholders and employees. URS stockholders will receive significant, immediate value from the transaction and will be able to participate in the future prospects of the combined company, which we expect will be better positioned to compete for major, complex projects across a diverse range of end markets and geographic regions."
"Our two businesses are complementary, and our cultures are highly compatible. 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."
AECOM will pay US$56.31 per URS share, based on AECOM's closing price on July 11, 2014, representing a premium of 19% over the trailing 30-day average closing price of URS shares ending July 11, 2014. URS stockholders will receive per share consideration equal to US$33.00 in cash and 0.734 shares of AECOM common stock for each URS share. URS stockholders may elect to receive all cash or all stock consideration, subject to proration in the event of oversubscription.
AECOM stockholders will retain their shares following the consummation of the transaction. Upon completion of the transaction, URS stockholders will own shares that account for approximately 35% of the combined company, which will allow URS stockholders to participate in the prospects of a business that is well positioned to create long-term stockholder value.
AECOM also expects annual cost synergies of US$250 million, nearly all of which it expects to achieve by the end of fiscal year 2016. Including the realization of expected synergies, the approximately US$6 billion enterprise value of the transaction is less than 7x pro forma 2015 URS EBITDA.
AECOM has received a firm commitment from Bank of America to provide debt financing in connection with the transaction, subject to customary conditions, the proceeds of which will be used to refinance a portion of existing AECOM and URS debt and to finance the cash consideration to be paid in the transaction. At closing, AECOM is expected to have approximately US$5.2 billion in total debt outstanding.
"We will continue to maintain our balance sheet flexibility," said Stephen M. Kadenacy, chief financial officer. "We plan to use our strong free cash flow to reduce our debt level, with a goal of returning to our long-term target leverage ratio of approximately 2 times debt-to-EBITDA by the end of 2017."
AECOM will become one of the largest companies by revenue in the engineering and construction industry. The combined firm will be headquartered in Los Angeles and will be the largest publicly traded company in that city. AECOM also expects to maintain a key operational presence in San Francisco, where URS is headquartered.
Michael S. Burke will be the combined company's chief executive officer, and the companies have designed a new operating management structure that will include proven senior leaders from both URS and AECOM. John M. Dionisio, AECOM executive chairman, will be chairman of the board and, at closing, AECOM will elect two URS board members to the AECOM Board of Directors.
BofA Merrill Lynch acted as lead financial advisor to AECOM with Moelis & Company LLC also acting as financial advisor. Gibson, Dunn & Crutcher LLP served as AECOM's legal counsel. Dean Bradley Osborne and Citi Corporate and Investment Banking acted as financial advisor to URS, and Wachtell, Lipton, Rosen & Katz and Cooley LLP served as its legal counsel.