URS $3.2B Deal Goes to Shareholder Vote

The proposed cash-and-stock deal, valued at $3.2 billion by the two companies, has faced stiff resistance from a contingent of Washington Group shareholders who contend URS should be paying substantially more.

The backlash prompted Washington Group to postpone an Oct. 30 shareholder vote to give its management and URS more time to turn the tide.

After some boardroom haggling, San Francisco-based URS last week agreed to throw in more of its stock to boost the proposed purchase price by about $200 million. URS and Washington Group valued the sweetened bid at $97.89 per share, an 8.5 percent increase from $90.20 per share under the previous terms.

Washington Group shareholders are scheduled to vote on the revised offer Thursday morning at the company's Boise, Idaho, headquarters. URS shareholders, who appear mostly supportive of the deal, will vote in a separate meeting to be held in New York.

In an indication that investors believe the deal will be nixed, Washington Group's stock price has dropped nearly $2 per share below the deal's current value of about $93.97 per share.

The deal's value constantly fluctuates because the price is tied to the ups and downs of URS' shares, which fell 45 cents to $55.75 Wednesday. Washington Group shares shed $1.49 to close at $92.01.

Since URS made its first acquisition proposal in late May, Washington Group's shares have climbed by more than 30 percent.

The run-up has been driven by URS' rising stock as well as Washington Group's higher profits. In its most recent quarter ending Sept. 28, Washington Group earned $36.4 million, a more than eightfold improvement from $4.3 million at the same time last year.

By joining forces, URS and Washington Group think they can create a more well-rounded company better equipped to win contracts for a wide range of projects, including building roads and power plants as well as searching for oil and gas. The companies also believe they would be less vulnerable to economic downturns.

Together, URS and Washington Group would employ more than 54,000 workers worldwide and generate more than $8 billion in annual revenue.

Three shareholder advisory firms -- Glass Lewis, Proxy Governance and Egan-Jones -- are supporting Washington Group's sale to URS. But the biggest advisory firm, Institutional Shareholder Services, came out against the deal.

Greenlight Capital Inc., which owns about 10 percent of Washington Group's stock, plans to reject the URS offer, said Mary Beth Grover, a spokeswoman for the New York-based hedge fund.

In a July analysis sent to Washington Group's board, Greenlight Capital President David Einhorn argued the company is worth at least $117 per share, or about $3.8 billion.

Einhorn, who won more than $650,000 last year in the World Series of Poker, based his assessment on Washington Group's earnings outlook.

URS Chairman Martin Koffel has vowed not to raise the stakes again. In a conference call last week, he described the current bid as URS' "best and final" offer.

But URS still may have an ace up its sleeve. If the current offer is turned down by a narrow margin Thursday, Washington Group could schedule another vote next month so its non-executive chairman, Dennis Washington, can convert 3.22 million stock options into a 10 percent stake in the company.

Washington has already promised to vote all his stock in support of the URS takeover, if necessary.