AECOM announces agreement to sell civil construction unit

Dive Brief:

AECOM announced today that it has entered into an agreement to sell its civil construction business to affiliates of Bethesda, Maryland-based infrastructure investor and operator Oroco Capital. The transaction is expected to close in January. A sales price was not disclosed.
The company's civil construction business does heavy civil, mass transit, mining, water, highway and bridge work for private and public clients. The sale includes the Shimmick Construction business, which AECOM purchased for $175 million in 2017.
The Los Angeles-based company sold its power construction business in October and the two transactions will help the firm advance its strategy of focusing on higher-margin, lower-risk work, said CEO Troy Rudd in the official statement.

Dive Insight:

The announcement is not a surprise to investors and those who follow the company closely, according to Andrew Wittmann, senior research analyst with Baird Equity Research's Industrial Services division.

"Investors have been expecting this for some time and therefore the announcement is more of a verification of the plan than anything new," he said. "The company has been making a concerted effort for a while now exit all of its fixed-price construction operations, of which its civil construction arm is the largest part."

The company, the third largest contractor in the U.S. by revenue, also announced major changes to its board of directors this week. With these changes, seven of the firm's 11 board members will have been appointed within the past year. They include:

The nominations of Diane C. Creel and Sander van’t Noordende as new independent directors for election at the company’s 2021 annual meeting in February.
Lydia H. Kennard, whose appointment was previously announced, will join the board effective Dec. 14.
Robert J. Routs will retire and not stand for re-election.
As previously disclosed, Steven Kandarian will not stand for re-election.

These changes appear to settle the firm's issues with Starboard, an activist investor with a 4% stake in AECOM. Starboard board member Peter A. Feld resigned in June over the appointment of Troy Rudd as CEO, saying he disagreed about the CEO search process and the board's decision to take a vote without notifying the search committee ahead of time.

Other large contractors have also announced sales and purchases in recent weeks. One of them, WSP Global, was reportedly in talks to buy AECOM earlier this year.

The Montreal-based company announced Dec. 3 that it will buy Ontario, Canada-based environmental consulting specialist Golder Associates for $1.14 billion in cash. The deal will push revenues from WSP's earth sciences and environmental consulting services to account for approximately $2 billion, or 25%, of its total $8 billion in pro forma net revenues.