Construction and engineering company AECOM has entered into an agreement to sell its Management Services unit to affiliates of two private equity firms for $2.405 billion.
The sale to American Securities LLC and Lindsay Goldberg is slated to wrap up in the first half of fiscal 2020 and AECOM plans to use the proceeds to slash debt and to repurchase stock, according to an Oct. 14 company announcement.
Michael S. Burke, AECOM chairman and CEO, said the company has since 2017 been on a “deliberate course” to maximize the value of its franchises.
“In close consultation with our Board and strategic advisors, we formalized our capital allocation policy that prioritizes debt reduction and stock repurchases, executed on a substantial cost reduction plan that is expected to expand DCS margins by 210 basis points from fiscal 2018 to fiscal 2020, and are taking other actions to de-risk our business to create an industry-leading professional services platform with consistently high returns,” he said.
The deal, along with the company’s expected record fourth-quarter free cash flow, will bolster AECOM’s balance and result in more flexibility to deploy capital in the future, said Troy Rudd, AECOM chief financial officer.
John C. Vollmer, president of AECOM’s Management Services group, and the current management team will continue to lead the business.
“This transaction is a testament to our proven execution ability in complex, mission-critical situations globally, and the hard work and commitment of our talented employees,” Vollmer said. “American Securities and Lindsay Goldberg have impressive track records of building lasting value for their portfolio companies, particularly in the government services sector. I am confident that this world-class investor group has the resources and expertise that will enable us to accelerate our innovation and future growth.”
The Los Angeles, California-based Fortune 500 company has about 87,000 employees and customers in over 150 countries. The firm had a revenue of roughly $20.2 billion during fiscal year 2018.