California engineering design firm AECOM Technology Corp. said on Sunday that it would pay $6 billion to acquire its engineering and construction rival URS in San Francisco. The purchase will make AECOM the second-largest engineering and construction company in the country.
AECOM turned to Gibson, Dunn & Crutcher for legal representation on the deal, while URS sought counsel from Wachtell, Lipton, Rosen & Katz and Cooley.
AECOM, which has worked on the construction of the new World Trade Center in New York as well as the World Cup stadium in Moscow, will pay URS shareholders $33 in cash and 0.734 share of AECOM stock for each URS share—a 19 percent premium over the 30-day average closing price of URS shares and an 8 percent premium over URS’ closing share price on Friday. AECOM will also assume $2 billion in URS debt.
The merger is expected to produce the largest publicly traded company in Los Angeles and further facilitate AECOM’s global reach by adding key capacities and expertise in markets including construction, oil and gas, power and government services. AECOM and URS generated $19 billion in total revenue last year and employ about 95,000 people in 150 countries.
The deal is expected to bring $250 million in annual cost savings for AECOM by the end of fiscal year 2016. The acquisition would substantially strengthen AECOM’s foothold in energy and construction sectors and its work with the government.
In 2013, over 40 percent of URS’ $11 billion revenue came from its energy, construction, oil and gas sectors. Projects with government customers, including the U.S. Army and the Department of Energy, make up 34 percent of URS’ annual profit.
“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,” said Michael S. Burke, AECOM president and chief executive officer, in a statement.
URS’ recent financial struggles gave AECOM the incentive to initiate the acquisition. Executives of URS forecasted lower-than-expected revenue growth in February due to its poor performance in the oil and gas sector. Bill Lingard, URS’ president and chief operating officer, resigned at that same time. Federal cutbacks on a major chemical weapons demilitarization project in April led to an estimated $355 million loss in annual revenue.
According to Reuters, URS met with industry rivals and buyout firms for a potential sale last Friday under pressure from activist investor Jana Partners. Jana began buying a larger stake in URS last year, which led to a shuffle on the company’s board in March.
Advising AECOM on the deal is Gibson Dunn, with a team that includes corporate partners Jonathan Layne and Peter Wardle, tax partner Hatef Behnia, benefit partner Sean Feller, finance partner Linda Curtis, antitrust partners Joshua Soven and Adam Di Vincenzo, corporate associates Marc Collier and John Volk, tax associate Andrew Kreisberg and finance associate Melissa Barshop.
Gibson Dunn has been outside corporate and securities counsel to AECOM for many years. Layne assisted the company on its $245 million acquisition of Tishman Construction in 2010. He also handled AECOM’s $808 million IPO in 2007.
URS sought counsel from Wachtell, with corporate partners Edward Herlihy and David Shapiro leading a team that includes antitrust partner Nelson Fitts, executive compensation and benefits partner Jeannemarie O’Brien, restructuring and finance partner Joshua Feltman, tax partner Joshua Holmes, corporate associate Marshall Shaffer, antitrust associate Franco Castelli, executive compensation and benefits associate Kate Napalkova and restructuring and finance associate John Sobolewski.
Cooley’s team advising URS was led by corporate partner Sam Livermore and antitrust partner Howard Morse. Cooley offered legal counsel on URS’s $1.25 billion acquisition of Flint Energy Services in 2012.