AECOM (ACM) To Offload Management Services Unit, Shares Up
Zacks Investment Research | Oct 14, 2019 10:23PM ET
AECOM (NYSE:ACM) has entered into an agreement for the sale of the Management Services business, marking an important milestone for its ongoing portfolio transformation. The sale to American Securities LLC and Lindsay Goldberg is expected to close in first-half 2020.
Shares of AECOM gained more than 6% post the announcement of the news, closing Oct 14 session at $39.50.
Terms of the Deal
The transaction, which is valued at $2.405 billion, reflects an 11.6x multiple on expected fiscal 2019 adjusted EBITDA and a premium to AECOM’s overall valuation. The price also includes the contingent purchase price of approximately $150 million.
Rationale Behind the Sale
Management Services is a major contractor to the federal government, its agencies and allied governments. This deal is in line with AECOM’s ongoing execution of strategies, including $225-million General and Administrative (G&A) reduction plan, to de-risk the business and maximize shareholder value.
The company — which has already completed 25% of its country exit plan as of Dec 31, 2018 — intends to exit more than 30 countries in order to prioritize investments in markets with higher prospects and competitive advantages.
Post the completion of the latest divestiture, the resulting professional services business is expected to be a lower risk, higher-returning firm focused on industry-leading design, planning, architecture, engineering, program management and construction management capabilities.
AECOM — a Zacks Rank #3 (Hold) company — intends to reduce debt, repurchase shares and maintain the long-term net leverage target of 2.0-2.5x through this transformative and value-enhancing approach. You can see Zacks Investment Research
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