Fluor is receiving strong interest as it seeks a buyer for the government contracting business that does work for the U.S. Department of Energy and other federal agencies, CEO Carlos Hernandez said this week.
“The interest in that business is very, very substantial,” Hernandez said Wednesday during an appearance at the Credit Suisse 7th Annual Industrials Conference in Palm Beach, Fla. The CEO made the remarks during a one-on-one discussion with Credit Suisse Managing Director of Equity Research Jamie Cook, which was streamed on Fluor’s website.
Fluor announced in September it was placing the government services unit on the market. Since then, it has seen interest from both investment houses and companies that already have a government contracting presence, Hernandez said.
Some companies wanted to make a “pre-emptive” offer for the unit before September, but Fluor declined in hopes of getting a better price by publicly inviting all interested parties to bid, Hernandez said. He expressed confidence the Texas-based engineering and construction multinational will get an attractive price for the business.
The vendor plans to receive at least $1 billion through the sale, which is expected in 2020.
Once joint ventures are factored in, Fluor’s government sector has more than 28,000 employees working on about 40 projects.
The Fluor branch offers companies already in the government-contracting business an opportunity to increase their presence in the market, Hernandez said: “While the margins [in government work] are not high, they are very steady.”
Fluor is a partner or leader on several major Department of Energy defense-nuclear contract. On nuclear weapons programs, the company is one of two integrated industry subcontractors for Triad National Security, the management and operations prime for the Los Alamos National Laboratory in New Mexico. Fluor Marine Propulsion, a subsidiary, is the prime contractor for the National Nuclear Security Administration’s (NNSA) Naval Nuclear Laboratory program in upstate New York, Pennsylvania, and Idaho.
During the conversation, Cook noted that AECOM agreed in October to sell its government contracting business for $2.4 billion. The agreement with a joint subsidiary of two New York investment houses happened quicker than many observers expected, the analyst added.