AECOM Facing Legal Challenges to Planned Purchase of URS

AECOM disclosed late last week that it is facing several legal challenges to its planned purchase of URS. “In connection with the merger, beginning on July 21, 2014, five putative class action lawsuits were filed in the Court of Chancery of the State of Delaware by purported URS stockholders: Falato v. URS Corp., et al., Case No. 9921; City of Atlanta Firefighters’ Pension Fund v. Creel, et al., Case No. 9924; Petroutson v. URS Corp., et al., Case No. 9938; Miller v. URS Corp., et al., Case No. 9939; and Oklahoma Police Pension & Retirement System v. Creel, et al., Case No. 9975,” AECOM said in an Aug. 1 filing with the Securities and Exchange Commission. “The complaints allege, among other things, that some or all members of the URS board of directors breached their fiduciary duties by approving the merger, and that the other defendants aided and abetted those alleged breaches. The complaints seek, among other relief, class certification, preliminary and permanent injunctive relief, and damages. URS and AECOM believe the lawsuits are without merit and intend to defend vigorously against them,” the filing states.

 

AECOM is looking to purchase URS in a deal worth approximately $6 billion. The purchase involves AECOM acquiring all outstanding URS shares for $4 billion and assuming about $2 billion in URS debt. AECOM plans to pay $56.31 per share of URS stock, 19 percent higher than URS’ 30-day average closing price. AECOM and URS expect to complete the deal in October, and this week AECOM announced that it is moving forward in obtaining financing for the deal and that it has passed required U.S. antitrust reviews. In a call with investors this week, AECOM President and CEO Michael Burke said the reaction to the planned acquisition of URS has been “overwhelmingly positive” from investors and clients, among others. “Some AECOM clients are telling us that they like the expanded capabilities we will be bringing to them, and URS clients are telling us that they’re excited about the expanded geographic footprint. This feedback is entirely consistent with what our strategy has always been,” Burke said. “With the highly complementary nature of our businesses, we anticipate a successful integration process. AECOM has a proven track record of acquiring companies, with a core expertise that can be delivered through our global platform.”

 

In its Aug. 1 SEC filing, though, AECOM noted the challenges it could face integrating URS if the purchase goes forward. “AECOM will be required to devote significant management attention and resources to integrating the business practices and operations of URS with AECOM. Due to legal restrictions, AECOM and URS have been able to conduct limited planning regarding the integration of URS into AECOM after completion of the merger and have not yet determined the exact nature of how the businesses and operations of URS will be run following the merger,” the filing says. It goes on to state, “Following the merger, the size of the business of AECOM will increase significantly beyond the current size of either AECOM’s or URS’s existing business. AECOM’s future success depends, in part, upon its ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new global operations and associated increased costs and complexity. There can be no assurances that AECOM will be successful after completion of the merger or that it will realize the expected benefits currently anticipated from the merger.”

 

The SEC filing also outlines the history of AECOM’s offer to purchase URS, noting that several other companies had explored either purchasing parts of URS or the entire company. Among the other companies that had expressed some interest were several private equity firms; a “publicly-listed engineering and construction company”; and a “privately held environmental services company” with a “private equity owner,” according to the filing.