AECOM announces intent to spin off its industry-leading government services business
28 June 2019
AECOM (NYSE:ACM), a premier, fully
integrated global infrastructure firm, today announced that its Board of
Directors has unanimously approved a plan to pursue a spin-off of the
Company’s Management Services segment into a leading, standalone
government services company. The transaction is currently expected to be
completed in the second half of fiscal 2020.
Strategic & Financial Benefits
As standalone entities, both AECOM and the government services business
are expected to benefit from:
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Strong management teams with a honed focus on their respective businesses and capital structures optimized to the unique characteristics of each busines
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Added long-term financial flexibility to invest in each business’s strategic growth priorities, and to allocate capital to the best and highest use.
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Separate boards of directors with skillsets and experience to provide focused insights and to support strategic and financial objectives and enhanced value creation.
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Company-specific incentive programs and performance indicators to most closely align employee incentive compensation opportunities with standalone business performance.
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Enhanced appeal to a broader set of investors suited to the particular strategic and financial characteristics of each business.
The new public company resulting from the spin-off of
the Management Services segment will be a top 20 government services
provider, as ranked by Bloomberg, and will leverage its considerable
intelligence, cybersecurity, IT, nuclear remediation and O&M expertise
to continue to deliver value and best-of-class services primarily to
national government clients, including the U.S. Departments of Defense
and Energy and various intelligence and other agencies. As an
independent entity, the government services business will be best
positioned to accelerate the execution of its strategic plan, invest to
expand its capabilities and to pursue its more than $30 billion pipeline
of opportunities. The business has several key competitive advantages,
including scale in a fragmented market, a strong execution track record,
a substantial base of longduration classified work and more than 25,000
talented and committed employees, more than 10,000 of whom have security
clearance. The business also benefits from a lower-risk profile that
features predictable cash flow and high returns on capital, which will
enable flexibility to invest in profitable growth and deleveraging. In
fiscal 2018, the Management Services segment generated revenue of $3.7
billion, operating income of $200 million and adjusted operating income1
of $239 million. In addition, the segment delivered 18% adjusted
operating income growth in the first half of fiscal 2019.
This transformational initiative builds upon the strategic actions AECOM
has taken and continues to take to maximize shareholder value, including
the already-executed $225 million G&A reduction, the anticipated exit of
hard-bid at-risk construction, the exit of non-core Oil & Gas and
fixed-price combined-cycle gas power plant construction, the planned
exit from more than 30 countries and the decision to no longer pursue
international at-risk construction opportunities. As a result of the
proposed spin-off and these ongoing strategic actions, AECOM will
benefit from a honed focus on its high-returning professional services
businesses with leading market share, strong cash flow and on attractive
financial return profile to foster continued growth, return of capital
to shareholders, and debt reduction under the Company’s existing capital
allocation policy.
“Today’s announcement marks a transformational step forward for AECOM
and continues our pursuit of maximizing shareholder value by best
positioning our industry-leading businesses for long-term success,” said
Michael S. Burke, AECOM’s chairman and chief executive officer. “Over
the past several years we have built a portfolio of leading
infrastructure and government services capabilities, and our success is
reflected in our strong first half fiscal 2019 financial performance,
including a record $18 billion in wins, a record $61 billion backlog,
continued positive organic growth and 16% adjusted EBITDA growth. The
Management Services segment has successfully capitalized on a
substantial pipeline of opportunities, leading intelligence and
classified sector capabilities and a proven leadership position with the
U.S. Departments of Defense and Energy. This is evidenced by 127%
backlog growth since the beginning of fiscal 2017 and three consecutive
quarters of double-digit organic revenue growth. Importantly, today the
Management Services segment is of the appropriate size and scale to
successfully stand alone as a leader in the government services market.”
Mr. Burke continued, “As part of our continuing efforts to best position
each business for long-term strategic and financial success, and in
recognition of our current valuation that we believe does not fully
reflect the value inherent across our enterprise, we identified an
opportunity to unlock value through a separation of our two businesses.
As leaders in their respective markets, both AECOM and the standalone
government services business will be ideally positioned to benefit from
a sharpened strategic focus on pursuing growth strategies best suited to
each company’s end markets and strategic growth objectives. This will
allow each company to deliver exceptional value to all its stakeholders,
including clients, employees and shareholders.”
Following the transaction, both AECOM and the standalone government
services business are expected to be capitalized with ample liquidity to
support operating and strategic investment plans. John Vollmer, group
president of the Management Services segment, and the existing
management team are expected to continue to lead the standalone
government services company. Additionally, Randy Wotring, AECOM’s chief
operating officer, is expected to serve as chairman of the Board of
Directors of the standalone government services business.
For more information visit
https://investors.aecom.com/news-releases/news-release-details/aecom-announces-intent-spin-its-industry-leading-government
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Source: AECOM - www.aecom.com
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