AECOM exits civil construction
Engineering giant AECOM is busy selling off its higher-risk construction operations.
On January 4, the firm announced the completion of the sale of its civil construction business to Oroco Capital, an infrastructure investor and operator based in Maryland. The transaction was originally announced in December.
Financial terms have not yet been disclosed.
Civil construction has been one of AECOM’s largest service offerings. The firm performs heavy civil, mass transit, mining, water, highway, and bridge work for clients in the public and private sectors.
Notable Canadian projects being performed by AECOM’s civil construction group include the Ottawa light rail transit project, the Eglinton Crosstown LRT, the Hurontario LRT, the Blue Line Extension in Montreal, the Finch West LRT, and the Highway 401 expansion from the Credit River in Mississauga to Regional Road 25 in Milton.
The sale includes Shimmick Construction, which was acquired in 2017 for $175 million.
In October, AECOM sold its power construction business to CriticalPoint Capital. That sale, and the sale of its civil construction group, have been driven by activist investors Starboard Capital, which have pressured AECOM to exit higher-risk, fixed-price construction operations in favour of higher-margin, lower-risk professional services contracts.
“The completion of the sale of the civil construction business marks a significant milestone in the transformation of our business profile to best position AECOM for long-term success,” said CEO Troy Rudd. “As global leaders in the infrastructure, environment and water markets, we are poised to capitalize on our clients’ increasing demand for our consulting services to transform cities, achieve bold ESG ambitions and better the communities we serve. With the progress we have made on our key strategic priorities, our advancement of our Think and Act Globally strategy to drive growth and the momentum in the business, we remain committed to repurchasing shares in order to fully capitalize on the value creation opportunity.”
Separately, the company announced that it has executed nearly $150 million of share repurchases since its fourth quarter fiscal 2020 earnings announcement on November 16.
Since September 2020, the company has executed more than $600 million of share repurchases. The company now has approximately $850 million of repurchase capacity remaining under its existing $1 billion board authorization.
It is believed that WSP was in talks to buy AECOM before the COVID-19 pandemic was declared. WSP later went on to acquire Ontario’s Golder Associates for about $1.5 billion. That transaction is expected to close in the second quarter of this year, and will boost WSP’s environmental services business to a quarter of its overall revenue.