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URS Corp. Buying Washington Group for $2.6 Billion

Mon July 16, 2007 - National Edition

BOISE, Idaho (AP) San Francisco-based URS Corp. is buying Washington Group International for $2.6 billion, the engineering and construction companies announced May 28.

The boards of directors of both companies unanimously approved the deal, which calls for Washington Group stockholders to receive $43.80 in cash and .772 shares of URS stock for each Washington Group share.

The transaction is valued at $80 per share, or a 14 percent premium over Washington Group’s closing stock price on May 25.

“URS has a history of anticipating change in the industry, and this transaction is the next logical step in building for future growth,” URS chief executive Martin Koffel said in a prepared statement.

Washington Group is part of Montana billionaire Dennis Washington’s industrial holdings and he chairs its board of directors.

The deal combines two of the nation’s largest engineering and construction firms. URS has 29,500 employees in 20 countries, while Washington Group has 25,000 employees worldwide.

The deal, which is subject to approval by the stockholders of each company and regulators, is expected to close in the second half of this year, the companies said.

The combined company would operate under the name URS Corp., and would have one of the largest teams of nuclear scientists and engineers in the industry and a backlog of projects exceeding $11 billion in more than 50 countries, company officials said.

Koffel would remain as CEO of the combined company, and one member of the Washington Group board of directors will serve on the combined company’s board.

URS will “have a significant presence in the anticipated resurgence of the nuclear industry, including fuel sourcing, enrichment, power generation and spent fuel reprocessing and disposition,” Washington Group CEO Stephen Hanks said.

Boise-based Washington Group International was formed in 1996 with the merger of the Montana-based Washington Construction and Morrison Knudsen Corp. Morrison Knudsen helped build Hoover Dam and the San Francisco Bay Bridge.

Washington Group International earned nearly $81 million on more than $3.4 billion in revenue during the 2006 fiscal year, but business has not always been so good for the company.

In May 2001, it emerged from its second bankruptcy filing in six years. At the time, executives blamed the company’s financial troubles on undisclosed liabilities it incurred when it bought Raytheon Engineers and Constructors, the power unit of defense and aircraft giant Raytheon Co.

The purchase gave Washington Group a strong foothold in the power and defense market, but it came with hidden costs. Of more than 300 contracts acquired in the purchase, a dozen cost much more to complete than Raytheon had disclosed to Washington Group. Raytheon estimated its costs at less than $800 million, while Washington Group later pegged them at $3 billion.

Washington Group sued Raytheon, and the companies later settled without any cash changing hands or either company admitting any wrongdoing. Eventually, Raytheon was required to pay $2.5 billion to complete the projects because of previous guarantees to project owners.

Former Washington Group shareholders also sued Raytheon for their losses. Raytheon settled that lawsuit in 2005 for $39 million without admitting any wrongdoing.

Past URS projects have included a renovation of the Pentagon and an expansion of the San Francisco International Airport. URS has a history of acquiring other companies: In 1995, it bought fellow design engineering firm Greiner Engineering Inc., a deal that Koffel said made it one of the top 20 design and construction management firms in the country at the time.

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