(Reuters) - Activist investor Starboard Value on Thursday urged construction and engineering firm AECOM to consider a strategic review of its assets, saying that its businesses were deeply undervalued.
Starboard, in a letter here to the company's chief executive officer and board, said AECOM should closely evaluate a sale of its construction services segment.
AECOM, which competes with Jacobs Engineering Group Inc and KBR Inc, on Monday said it intends to spin off the company’s management services unit, which provides logistics and technical assistance to the U.S. government.
Starboard holds a 4% stake in AECOM.
“The company’s consistently poor operating history has resulted in several years of disappointing shareholder returns,” Starboard said in the letter, adding that AECOM’s performance was a result of poor execution, rather than uncontrollable external factors.
The company said in a statement that it “appreciates” the input of all investors and “will review” Starboard’s letter, noting that it has taken many steps to improve shareholder value. It said it had already planned to spin off its management services business and is reviewing how to improve margins over the long term, among other things.
In 2018, AECOM reported revenue of $20.16 billion, with construction services contributing $8.24 billion and $8.22 billion from its design and consulting unit.
Starboard said it believes there is no reason for the company to operate at a significant margin disparity with its peers, given the advantages of larger scale over most of its rivals.
The company’s shares closed up 0.5% at $36.73.
Reporting by Debroop Roy and Sanjana Shivdas in Bengaluru and Svea Herbst-Bayliss in Boston; Editing by Shailesh Kuber and Bill Berkrot