URS Corporation and Flint Energy Services Ltd. announced Monday a definitive agreement under which URS will acquire Flint for $25 per share in cash, or $1.25 billion.
URS also will assume approximately $225 million in Flint debt. The transaction, which has been approved unanimously by the URS and Flint Boards of Directors, will significantly expand URS' opportunities to serve clients in the oil and gas industry.
Flint, a leading provider of construction services for the oil and gas industry, currently supports many of the largest companies operating in the oil, oil sands and gas producing regions of Western Canada and in the Southwest, Appalachian and Rocky Mountain regions of the United States.
The acquisition will be implemented through a court-approved Plan of Arrangement under Canadian law and is subject to the approval of Flint security holders, relevant regulatory approvals and other customary closing conditions. The transaction is expected to close in the second quarter of 2012, to be accretive to URS' 2012 GAAP earnings, and to increase URS' revenues from the oil and gas sector to approximately 22% of total revenues.
Flint has approximately 10,000 employees and a network of approximately 80 locations in North America. The company's diversified activities span the full cycle of oil and gas exploration and production, including constructing well pads, moving rigs, manufacturing processing equipment, installing small and mid-diameter pipelines, transporting fluids, performing a wide range of mid-cycle production services, and constructing and maintaining large oil sands facilities. Revenues from Western Canada's oil, oil sands and gas producing regions accounted for approximately 80 percent of Flint's revenues for the trailing twelve months from Sept. 30, 2011, with the remaining 20 percent coming from the United States. Flint is expected to add approximately $3.5 billion to URS' book of business upon closing. Following the close of the transaction, Flint will become a new division of URS, led by W. J. (Bill) Lingard, Flint's President and Chief Executive Officer, as the Division President.
"Expanding our presence in the oil and gas sector has been a longstanding strategic priority for URS. Flint is one of North America's leading fully integrated production and construction services providers to the oil and gas sector, with many long-duration construction contracts and multi-year maintenance agreements. Through this combination, URS will be well positioned in segments of the oil and gas industry that we expect to have attractive margins and growth rates. In addition, by joining with URS, Flint will be able to offer its base of multinational clients the full range of engineering, procurement and construction management services through URS' existing operations," said Martin M. Koffel, Chairman and Chief Executive Officer of URS.
Stuart O'Connor, Chairman of Flint's Board of Directors said, "We are very pleased with the arrangement with URS. It delivers a significant cash premium to our stockholders while also allowing Flint to accelerate the growth of its business by offering a more complete suite of services to clients."
Mr. Lingard added, "Having access to URS' pool of talented and experienced construction managers will allow Flint to oversee more projects simultaneously and drive revenue growth. Flint's employees should also benefit from and enjoy more opportunities to work on a wider range of complex projects in both Canada and the United States. We look forward to working with our URS colleagues to achieve the exciting potential of the combination."
H. Thomas Hicks, Chief Financial Officer of URS, said, "We expect this transaction will build significant long-term value for our stockholders. Flint offers a diversified, full cycle of services, has limited exposure to fixed price contracts and derives its earnings entirely from operations in the stable North American region. Assuming a second quarter close, we expect to achieve pre-tax cost synergies of US$10-$15 million in 2012, with additional savings expected in the following years as we benefit from economies of scale. We expect the transaction to be accretive to URS' 2012 EPS between US$0.20 and US$0.30 per share, which reflects expected acquisition related costs, estimated amortization of intangible assets and the estimated cost synergies discussed above."
URS has financing in place to complete the acquisition under its existing credit facility and a financing commitment for a new bridge facility. Permanent financing is expected to consist of borrowings under URS' existing credit facility and new debt. Said Mr. Hicks, "URS intends, as in past acquisitions, to use its strong cash flows to reduce debt quickly, while retaining the flexibility to continue to invest in the business and, when debt levels have been reduced, pursue additional growth opportunities."
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