The companies' combined 2006 revenues would have been $7.6B, the fourth highest among US publicly-traded engineering and construction companies. Based on previously issued guidance, the companies would have combined 2007 revenues of approximately $8.6B. In addition, the companies would have had combined 2006 EBITDA of $425M and total backlog exceeding $11B, as of 31 March 2007. The combined company would have projects in over 50 countries and more than 54,000 employees.
The combined company will offer a full range of engineering, construction, operations and maintenance services for power plants globally. In the infrastructure market, the combined entity will be positioned to meet growing demand for comprehensive services on large, complex water/wastewater projects around the world. In addition it is expected to be a major contractor to the federal government, including a top five provider of technical services to the US Department of Defense and a provider of engineering, management and environmental services to the U.S. Department of Energy.
Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, Washington Group stockholders will receive $43.80 in cash and 0.772 shares of URS common stock for each Washington Group share. Based on the closing price of URS' stock on 25 May 2007, the last trading day prior to the announcement, the consideration is valued at $80.00 per Washington Group share, with an implied consideration mix of 55% in cash and 45% in stock. The current value of the consideration represents a premium of approximately 14% to the May 25, 2007 closing price of Washington Group shares. The transaction is intended to allow the portion of consideration received in URS stock to be tax-free to Washington Group stockholders. URS stockholders will retain their shares following the consummation of the transaction.
Upon completion of the transaction, Washington Group stockholders would own approximately 31% of the combined company. The combined company will be called URS Corporation.
'Through this combination, both companies will be better positioned to capture growth from favorable trends across the engineering and construction sectors, including the increased investment in infrastructure projects, the focus on emissions reduction and energy independence in the power market, and the increased use of outsourcing by federal agencies, such as the U.S. Departments of Defense and Energy,' said Martin M. Koffel, Chairman and Chief Executive Officer of URS. 'Together, we will have the resources to meet increasing client demand for a single firm that can provide the full range of engineering and construction services required for large, complex projects in these high growth markets, both in the United States and abroad. In addition, our clients will benefit from the combined firm's expanded capabilities in the oil and gas, industrial process, facilities design and management, mining and homeland security sectors.'
URS has received a firm commitment from Wells Fargo and Morgan Stanley to provide debt financing for the cash portion of the transaction, subject to customary conditions. The transaction is not conditioned on financing and is expected to close in the second half of 2007. Following the close of the transaction, URS is expected to have approximately $1.5B in debt and a debt-to-total capital ratio of approximately 37%.
The transaction is subject to the approval of the merger agreement by Washington Group stockholders, the approval of URS' issuance of shares in the transaction by URS stockholders, regulatory approvals and customary closing conditions. Martin M. Koffel will remain CEO of the combined company. Upon completion of the transaction, one current member of the Washington Group Board of Directors will join an expanded URS Board of Directors.
Morgan Stanley acted as lead financial advisor to URS and Latham & Watkins and Cooley Godward Kronish LLP served as URS' legal counsel. UBS also advised URS on the transaction. Goldman Sachs acted as financial advisor to Washington Group and Wachtell, Lipton, Rosen & Katz and Jones Day served as Washington Group's legal counsel.
Additional information about this transaction is available online at www.urs-wng.com.
