URS to Acquire Washington Group for $2.6 Billion

Engineering and construction company URS Corp. is buying competitor Washington Group for approximately $2.6 billion in cash and stock. The $80-per-share purchase price amounts to a 14% premium to Washington Group's Friday close. Washington Group shareholders will receive $43.80 in cash and 0.772 shares of URS common stock for each Washington Group share. The deal will unite two of the country's largest construction firms. The combined company will manage huge water, transportation and wastewater projects around the globe and will also provide engineering, construction and maintenance for fossil fuel and nuclear power plants. It also hopes to become a main contractor for the U.S. government. URS anticipates the purchase will enhance revenue growth, long-term profitability and cash flow and add to earnings in 2009 and beyond. The company is anticipating cost synergies of $50-55 million. The combined company, which will be called URS Corp., is expected to post 2007 revenues of approximately $8.6 billion. Washington Group, which was involved in the construction of the Hoover Dam and the San Francisco Bay Bridge, earned almost $81 million on over $3.4 billion in revenue last year. The deal should close in H2 2007.

Sources: Wall Street Journal, Reuters, Bloomberg, MoneyCentral
Commentary: Another holding gets taken out [Rampant Speculations]
Stocks/ETFs to watch: Washington Group International, Inc. (WNG), URS Corp. (URS). Competitors: KBR, Inc. (KBR), Fluor Corp. (FLR), Jacobs Engineering Group, Inc. (JEC). ETFs: PowerShares Dynamic Building & Construction (PKB), PowerShares Water Resources (PHO), iShares S&P SmallCap 600 Value Index (IJS)

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