Aecom’s $4bn merger with URS creates Californian colossus

Aecom’s  $4bn takeover of fellow Californian consulting engineer URS has created a colossus with more than 95,000 employees in 150 countries generating revenues of more than $19bn. Aecom is now twice the size of the world number two, Australia’s WorleyParsons, and is also the largest public company in its home city of Los Angeles.

The merger is intended to further Aecom’s corporate strategy of offering an integrated design and construction service. URS was thought to be a good fit in terms of skills because of its strengths in construction, oil and gas, power and government services. 

It is understood that a key target for the new group will be oil shale, which is one of the fastest growing areas in the US construction market – for firms with oil and gas expertise.

Michael Burke, Aecom’s president and chief executive, said the deal would transform Aecom’s global reach. He said: "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."

Aecom is hoping to combine this enhanced service offering with annual cost savings of $250m, created by merging overlapping areas of the business. 

The deal will come as something of a relief to URS, which has undergone a period of uncertainty this year. In March, a hedge fund called Jana Partners bought a 9.7% share for $346m and indicated its intention to negotiate with URS’ management regarding "the composition of the board, capital structure, corporate structure, and other matters impacting shareholder value creation", according to a stock exchange filing. 

The company’s shares, which had fallen from $55 in September to $45 in June rose to $54 on news of the deal. 

Martin Koffel, the chairman and chief executive of URS, said: "URS stockholders will receive significant, immediate value from the transaction and will be able to participate in the future prospects of the combined company." Under terms of the merger, Aecom will pay $56.31 per share for URS. URS’ stockholders will receive $33 in cash and 0.734 of an Aecom share for each share they hold of URS.

The deal was passed unanimously by the boards of both companies. It will now be subject to  regulatory consents and the approval of both companies’ shareholders. The transaction is expected to close in October 2014.

Among the projects that Aecom is working on are the World Trade Centre in New York and a headquarters for the Los Angeles Police Department. URS is presently undertaking the Ronald Reagan Medical Centre at UCLA and an expansion to the Disneyland resort.