Aecom Planning IPO to Pay Debt On Acquisitions

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Aecom Planning IPO to Pay Debt On Acquisitions

By CONOR DOUGHERTY

Staff Reporter

The parent company of Los Angeles architecture and engineering giant DMJMH+N (formerly Daniel Mann Johnson & Mendenhall) plans to raise as much as $473 million in an initial public offering to be completed in the coming months.

The IPO of more than 20 million shares, at an estimated price of close to $19 per share, would help Aecom Technology Corp., L.A.’s 10th largest private company and the nation’s third largest engineering and design firm, pay down debt and create a war chest for future acquisitions.

The company has been on an aggressive buying spree, acquiring more than 10 companies since 1999, among them Day & Zimmermann Infrastructure Inc. and the transportation planning practice of KPMG Consulting, for an aggregate value of $245.4 million in cash, stock and notes.

The acquisitions have helped drive revenues to $1.5 billion in 2001, up from $860 million in 1998. Employment during that period has more than doubled, reaching 13,800 last year from 6,400 in 1998.

Company officials declined comment on the pending offering.

In a Securities and Exchange Commission filing, Aecom reported net income of $10.4 million (44 cents per diluted share) for the fourth quarter ended Sept. 30, down from $10.9 million (42 cents) for the like year-earlier quarter.

Fourth quarter revenues were $405 million, vs. $398.4 million in the fourth quarter of 2001.

As of Sept. 30, Aecom had $147.6 million in long-term debt and $26 million in cash. Historically, the company has relied on cash flow from operations, sales of stock to employees and credit to satisfy capital needs, according to the filing.

The company has a $130 million unsecured line of credit with a syndicate of banks led by Bank of America. As of Sept. 30, 2001, Aecom had borrowed $37.9 million against that line of credit.

Oil roots

At one time the subsidiary of Kentucky-based Ashland Oil Inc., Aecom was formed in 1990 when employees of Ashland Technology Corp. bought the company from its parent. It is headquartered at Arco Plaza downtown and has 25 offices worldwide.

The firm works through several operating companies: CTE Engineers, DMJM Aviation, DMJM+HARRIS, DMJMH+N, Maunsell, McClier, Metcalf & Eddy and Turner Collie & Braden.

The company is involved in assorted projects: American Airlines’ $1.3 billion expansion at New York’s JFK Airport, design engineering and environmental analysis for the California High Speed Rail Authority’s proposed high-speed rail line, and work for the Hong Kong Port and Maritime Board. Other major projects include ongoing renovations at the Pentagon, the $2.4 billion Alameda Corridor and design of the new Rand Corp. headquarters in Santa Monica.

Shell maneuver

Aecom plans to merge into a newly created-shell company that will execute the offering. Immediately following the offering, the company intends to make a $50 million tender offer to existing stockholders, giving them a chance to sell their shares. In SEC filings, the company said it chose the merger route so that employees could diversify their personal holdings.

Through Employee Stock Ownership Plans, employees own 55.7 percent of the company, directors and executive officers own 15.34 percent. Richard Newman, Aecom’s chairman and chief executive, owns just under five percent, the documents show. Employees control 100 percent of the company’s shares.

In a Feb. 11 SEC filing, Aecom said that engineering a deal that would allow stockholders, other than senior management, to sell their shares directly to the public would be too difficult, and that the merger route would have the same end result.

The buyback also would release employees from being subject to the lockout period that follows an IPO. Insiders are typically “locked out” prohibited from selling stock for at least three months.

Many companies have delayed IPOs until the market is less jittery. Aware of the volatile markets in recent months, Aecom mentioned “extreme price and volume fluctuations” in its discussion of risk factors. Still, the company said senior management had unanimously decided that going public would be “the right thing to do at this time.”

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