Mike Nartker
NS&D Monitor
3/21/2014

Shareholders have been able to convince two major contractors in the Department of Energy marketplace—URS and Babcock & Wilcox—to make changes to their boards of directors. This week, URS announced that it has reached an agreement with shareholder JANA Partners, LLC, which owns slightly less than 10 percent of the company’s stock, to make several changes to its Board of Directors, including the establishment of a “Value Creation Committee.” Late last week, B&W announced that it has agreed to support the addition of a member to its Board of Directors backed by shareholder Starboard Value LP, which owns approximately 1.8 percent of the company’s stock.

As part of its agreement with JANA Partners, URS will add four candidates the shareholder has proposed to its Board of Directors, effective March 27—Diane Creel, who previously served as Chairman, Chief Executive Officer and President of Ecovation, Inc., a subsidiary of Ecolab Inc.; William Schumann, III, , who serves as the non-executive Chairman of the Board of Directors of Avnet, Inc.; David Siegel, President and CEO of Frontier Airlines; and V. Paul Unruh, who previously served as vice chairman of Bechtel Group, Inc. “All are accomplished business leaders with experience relevant to the URS enterprise, and we are confident that they will prove to be valuable additions as we continue working to build value for our stockholders,” URS Chairman and CEO Martin Koffel said in a release. Two current members of URS’ board—Donald Knauss and William Sullivan—will not stand for re-election at the company’s 2014 annual meeting.

According to URS, the “Value Creation Committee” to be established will consist of four members, two of which will be among those put forth by JANA Partners. The committee will “evaluate all options for enhancing shareholder value, including by engaging an investment bank to conduct a strategic review of the Company’s business segments, operations and capital structure; and reviewing the Company’s management compensation structure to enhance alignment with shareholder value creation,” a URS release says. Two of the new directors will also be named to the URS board’s CEO Succession Committee. “Having led URS for more than 25 years, I had previously communicated to the Board that it was important to have my successor in place in 2014, and our goal is to do just that. The Board has asked me to remain as Chairman and Chief Executive Officer until a successor is named, which I expect to do unless circumstances change,” Koffel said.

Shareholder Proposed Changes After 2013 Results

According to filings with the Securities and Exchange Commission, JANA Partners decided to have “discussions” with URS concerning the makeup of its Board of Directors, as well as “its management, capital structure, corporate structure and other matters impacting shareholder value creation,” following URS’ release last month of its preliminary Fiscal Year 2013 financial results, which came in below expectations—a drop URS attributed to issues in its oil and gas business (WC Monitor, Vol. 25 No. 6). Along with the release of its preliminary FY 2013 results, URS announced Bill Lingard’s resignation from his position as President and Chief Operating Officer. Lingard came to URS in 2012 after it acquired Flint Energy Services, where had served as President and CEO, and held several senior management positions before assuming the role of president from Koffel last fall.

In this week’s press release, Barry Rosenstein, Managing Partner of JANA Partners, said, “We have appreciated our constructive dialogue with Martin Koffel and his team. We share their view that the Company is significantly undervalued, particularly given its strong cash flows and the valuable work Martin and his team have done over many years to ensure that URS is well-positioned to meet the needs of its clients. I am confident that the addition of four highly-qualified directors and the formation of the Value Creation Committee will help unlock this value for all shareholders.”

B&W to Add Former Home Depot CEO to Board

Under its agreement with Starboard Value, B&W will nominate former Home Depot CEO Robert Nardelli to its Board, as well as renominate current members Brian Ferraioli and James Ferland, at its 2014 meeting, scheduled to be held in early May. Current B&W Board member Anne Pramaggiore will not stand for re-election. “Mr. Nardelli brings to B&W a broad range of experience across business and finance,” B&W Chairman John Fees said in a release. “B&W’s Board and management remain focused on the priorities we have publicly outlined: increasing margins in our commercial business segments, reaching a decision on the best path forward for mPower and leveraging our strong balance sheet to support aggressive capital returns to shareholders. Bob’s broad experience will, we feel, be helpful in executing on these objectives,” he said. Starboard CEO Jeff Smith said in the release, “We are pleased to have worked constructively with B&W’s Board and management to add Bob Nardelli to the B&W Board. We believe Bob brings a fresh perspective and unique insight to the company and has the experience necessary to help B&W’s Board and management as they work toward significantly improving margins and returning capital to shareholders. We look forward to enhanced value for the benefit of all shareholders.”