Engineering and construction firm URS Corp. (URS) said Monday that it has agreed to buy Flint Energy Services Ltd. (FES.TO) for C$25 per share in cash, or C$1.25 billion, to expand its presence in fast growing segments of North American oil and gas industry, particularly in unconventional oil and gas extraction.
The per share purchase price represents a 68% premium to Flint's closing stock price on Friday.
San Francisco-based URS will also assume about C$225 million in Flint debt as part of the deal.
The deal, which has been approved unanimously by the URS and Flint boards, is expected to close in the second quarter of 2012.
With about 10,000 employees and a network of 80 locations in North America, Calgary, Canada-based Flint has diversified activities spanning the full cycle of oil and gas exploration and production, including constructing well pads, moving rigs, manufacturing processing equipment, installing small and mid-diameter pipelines, transporting fluids, performing a wide range of mid-cycle production services, and constructing and maintaining large oil sands facilities.
Following the closure of the deal, Flint will become a new division of URS, led by W. J. Lingard, Flint's current President and Chief Executive Officer.
URS expects the acquisition to add about US$0.20 to US$0.30 per share to its 2012 earnings. Flint is expected to add about US$3.5 billion to URS' book of business upon closing.
Martin Koffel, Chairman and Chief Executive Officer of URS, said, "Expanding our presence in the oil and gas sector has been a longstanding strategic priority for URS. Flint is one of North America's leading fully integrated production and construction services providers to the oil and gas sector, with many long-duration construction contracts and multi-year maintenance agreements."
URS said it has financing in place to complete the acquisition under its existing credit facility and a financing commitment for a new bridge facility.
All of the members of the Flint board, some senior officers and shareholders, who collectively own about 8% of Flint's outstanding shares, have agreed to vote their shares in favor of the acquisition.
The acquisition will be implemented through a court-approved Plan of Arrangement under Canadian law.
Flint has the right to consider and accept superior proposals. URS will have a five-business-day right to match the superior proposal. If the deal with URS is not completed due to a superior proposal, or for other certain specified circumstances, Flint will have to pay a C$42 million break-up fee to URS.
URS also provided its outlook for 2012. On a standalone basis, the company forecast revenues of US$9.9 billion to US$10.1 billion and net income of US$292 million to US$300 million, or US$3.95 and US$4.05 per share.
Analysts polled by Thomson Reuters currently expect the company to earn US$3.85 per share on revenue of US$10.25 billion for the full year 2012. URS shares closed Friday's regular trading session at US$42.91, up 12 cents.
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