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US giant URS set to edge out CH2M Hill in battle for Scott Wilson

Scott Wilson bosses have revealed that a need for global expansion is driving their desire to sell up to US giant URS in a cash deal worth £160M.

Scott Wilson directors have told the London Stock Exchange that they are recommending to shareholders a buy-out by US consulting giant URS. URS would pay £2.10 per Scott Wilson share, valuing the company at £161M.

But programme management giant CH2M Hill has also told the Stock Exchange that it too has completed a due dilligence assessment of Scott Wilson and is deciding whether to match or improve on URS’ offer. It said it “notes” the URS offer and that it will make a further announcement “shortly”.

Scott Wilson chairman Geoff French said the board was recommending the URS offer because it represents a “compelling proposition” for shareholders, customers and employees. He said that Scott Wilson would effectively become URS’ international arm. The US firm currently makes just 8% of its money overseas. With Scott Wilson that will rise to 14% of total revenues.

“We will become the combined group’s international arm,” said French. It is expected that URS will retain the Scott Wilson brand.

Group chief executive Hugh Blackwood will join the main board of URS and will oversee the combined operations of Scott Wilson in the UK, Ireland, Europe, India, Middle East and China. He said the two firms share the same strategic vision of operating in a global market.

URS’ UK operations - including its role as programme manager at Sellafield - will fall under Blackwood’s control.

“Through Sellafield URS is very well positioned for nuclear new build,” said Blackwood. “As a combined group we will be a fairly formidable organisation in new nuclear.”

The takeover is not expected to have a major impact on Scott Wilson’s 5,900 employees. “The whole deal is prevaricated on growth,” said Blackwood. “We will look at what happens when organisations merge. But there is very little overlap between the businesses - what there is is likely to be in back-office functions.”

French said the offer was great for shareholders. The company flotated in 2006 with a share price of 158p. Shares hit a low of 57p in June last year but are currently trading around 120p.

“The board of Scott Wilson considers that the offer, at a price of 210 pence per Scott Wilson Share in cash, provides a compelling opportunity for Scott Wilson shareholders to realise a significant premium in cash, and reflects the underlying value of Scott Wilson,” said French.

“As part of an enlarged and global group, our employees will be able to participate in larger and more complex projects as well as benefit from further investment in new areas of expertise and international markets where Scott Wilson has already established strong foundations.

“In an increasingly global marketplace, the board believes that a combination with URS will significantly enhance Scott Wilson’s future prospects and we are excited about our future together,” he said.

URS chairman and chief executive Martin Koffel said the takeover was an important step forward in his firm’s strategy to expand in the UK infrastructure market and in other key regions around the world.

“Scott Wilson’s market sectors are well aligned with URS’s existing focus,” said Koffel. “In addition to its strong infrastructure practice, Scott Wilson is well positioned in the environment and natural resources sectors, including the nuclear power market, which is a key area of strength for URS.”

Arden analyst Geoff Allum agreed it was a good deal.

“This is a very good deal for the shareholders; and not at all bad in this market. And they are in the happy position of anticipating a possible auction for the company. They won’t mind if a bid is hostile, its all about the price,” he said.

“But if you are the bidder you really do want the management to approve the deal. If people walk, you have got nothing.”

Takeover speculation was triggered earlier this month when a large movement in Scott Wilson’s share price forced the firm to announce that it had received approaches with regard to a possible acquisition. Following these approaches, Scott Wilson provided due diligence information to a number of undisclosed parties, including URS.

It is widely understood that the firm accepted that it needed to expand in order to win big contracts. It is currently working in joint venture with Aecom on the £1bn Izmit Bay bridge and with CH2M Hill on the £1.1bn Haramain High Speed Rail Project in Saudi Arabia.

Allum said the firm should have bought soon after it floated. “It is right that to win the bigger and more complex contracts you need to be big. Scott missed the moment to get bigger. It should have bought Hyder soon after it floated.”

If no further offers are made, shareholders will be asked to vote on the URS bid on or around 30 July.

 

 

Readers' comments (2)

  • Barry Walton

    'The takeover is not expected to have a major impact on Scott Wilson’s 5,900 employees. “The whole deal is prevaricated on growth,” said Blackwood.'

    Prevaricate - to speak or act falsely or evasively with intent to deceive.

    All those 5,900 employees - don't say you were not warned.

    B Walton (F)

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  • I'm afraid I agree - we're going the way of satellite TV and SKY - fewer employers so less choice of firms for engineers.

    Top 20 design firms in the world (2009) -

    1 Jacobs, Pasadena, Calif., U.S.A.
    2 AECOM Technology Corp., Los Angeles, U.S.A
    3 URS Corp., San Francisco, Calif., U.S.A.
    4 Fluor Corp., Irving, Texas, U.S.A
    5 WorleyParsons, North Sydney, NSW, Australia
    6 CH2M Hill, Englewood, Colo., U.S.A
    7 AMEC plc, London, U.K
    8 Fugro NV, Leidschendam, The Netherlands
    9 The Shaw Group Inc., Baton Rouge, La., U.S.A.
    10 SNC-Lavalin International Inc., Montreal, Canada
    11 WS Atkins PLC, Epsom, Surrey, U.K.
    12 ARCADIS NV, Arnhem, The Netherlands
    13 Bechtel, San Francisco, Calif., U.S.A.
    14 Tetra Tech Inc., Pasadena, Calif., U.S.A.
    15 KBR, Houston, Texas, U.S.A.
    16 Mott MacDonald Group Ltd., Croydon, Surrey, U.K.
    17 Parsons Brinckerhoff Inc., New York, N.Y., U.S.A.
    18 ARUP Group Ltd., London, U.K.
    19 Dar Al-Handasah (Shair & Partners), Cairo, Egypt
    20 WSP Group plc, London, U.K.

    Not much UK representation!

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