URS Corporation (URS) has offered to acquire all outstanding shares of Scott Wilson Group plc, based in United Kingdom, in an all-cash transaction, which values the target company at $242 million. The closing of the transaction is subject to shareholder approval and clearances from regulators.
Scott Wilson’s 2010 turnover was £340 million (approximately $510 million). The vast majority of the company’s 2010 revenues have been generated in U.K. and Ireland. The company specializes in design and engineering consultancy in the infrastructure sector. The company has 5,500 employees located in 80 offices in major commercial centers across Europe, Middle East, Asia-Pacific and India.
URS Corporation aims at deriving synergy from Scott Wilson’s favorable exposure to the environment and natural resources sectors, including nuclear power, in addition to its strong foothold in the infrastructure sector. Moreover, the company will have an expanded geographical presence and will be in a position to better serve the enhanced customer base resulting from the acquisition.
URS continues to see favorable trends in the government sector. There is strong funding for O&M programs, which means increased opportunities to support long-term DoD initiatives and stable funding for the DoE’s environmental and nuclear programs, including the National Nuclear Security Administration.
With respect to infrastructure, URS’ long-term outlook is very positive. State and local governments continue to fund infrastructure programs. In the previous fiscal year, states and municipalities sold billions of dollars of new bonds to fund infrastructure projects, including education and healthcare facilities as well as new roads. Key projects continue to move forward.
Demand for the company’s services is cyclical and vulnerable to economic downturns and reductions in government and private industry spending. If the economy remains weak or client spending declines further, then its revenues, profits and financial condition may deteriorate. Global economic conditions have caused, and may continue to cause, clients to delay, curtail or cancel proposed and existing projects. This decreases the overall demand for services, leading to weak financial results.
As a government contractor, URS Corporation must comply with various procurement laws and regulations, and is subject to regular government audits. Violation of any of these laws and regulations could result in sanctions, contract termination, forfeiture of profit, loss of reputation and status as an eligible government contractor. Any interruption or termination of its government contractor status could reduce profits and revenues significantly.
URS provides engineering, construction and technical services. As such, it offers a broad range of program management, planning, design, engineering, construction and construction management, operations and maintenance, and decommissioning and closure services to public agencies and private sector clients globally. It is also a major U.S. federal government contractor in the areas of systems engineering and technical assistance, and operations and maintenance.
We currently maintain a Neutral recommendation on URS Corporation.
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