EXCLUSIVE-Engineering firm URS in talks over potential sale -sources

Fri Jul 11, 2014 10:46am EDT

(Adds background on Jana position, share price)

By Soyoung Kim and Mike Stone

NEW YORK, July 11 (Reuters) - URS Corp, an engineering and construction services company with a market value of $3.5 billion, has held talks recently with industry rivals and buyout firms about a potential sale, people familiar with the matter said.

URS, which has been under pressure from activist investor Jana Partners to enhance shareholder value, has hired Citigroup Inc and DBO Partners to contact potential buyers and gauge their interest in the past few months, the people said on Friday.

It could not be learned if any of the recent discussions have led to offers or will result in a transaction. Some private equity firms that were approached have passed on a deal, according to the people, who asked not to be named because the matter is not public.

Shares of URS were up nearly 6 percent at $53.84 on the New York Stock Exchange on the news, boosting the company's market capitalization to more than $3.5 billion.

Representatives of URS, Citigroup and DBO Partners could not be immediately reached for comment.

In February, Barry Rosenstein's Jana Partners disclosed a stake of more than 9 percent in URS, a San Francisco-based provider of engineering, construction and technical services for federal agencies and companies.

The company later made a deal with Jana to add the investor's nominees to its board and also establish a "value creation committee" to evaluate options for increasing its stock price.

Under the agreement, Jana will also have a say in the selection of URS's new CEO, who will succeed current chief Martin Koffel by the end of 2014.

URS is a major contractor to the U.S. federal government, which accounted for a third of its 2013 revenue. Among its government customers are the U.S. Army and the Department of Energy.

Some of its large competitors include Fluor Corp, Jacobs Engineering Group, AECOM Technology Corp, Tetra Tech Inc and Chicago Bridge & Iron Company .

The services these companies provide do not require large upfront capital expenditures and therefore present limited barriers against new competitors. The industry has also been affected by federal budget cuts in recent years.

Activist investors such as Jana buy shares in companies they perceive as undervalued and advocate for change, such as a sale or breakup.

Jana is pressuring another company, PetSmart Inc, to explore a sale after reporting a 9.9 percent stake in the pet products retailer earlier this month. (Editing by Matthew Lewis)