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Monday, February 20, 2012

UPDATE 3-URS to buy Flint Energy for C$1.25 bln

Mon, Feb 20 17:00 PM EST

* Flint shareholders will get C$25/share; a 68 pct premium to Friday close * URS would also assume C$225 mln in Flint debt * URS expects deal to add $0.20-$0.30 a share to FY earnings * Sees cost synergies of $10 mln-$15 mln in 2012 By Himank Sharma and Supantha Mukherjee Feb 20 (Reuters) -

U.S. engineering company URS Corp will buy Canadian oilfield services company Flint Energy Services for C$1.25 billion (US$1.25 billion) in cash, to expand its presence in the oil and gas sector. Under the deal unanimously approved by the two companies' boards, Flint shareholders will get C$25 a share -- a 68 percent premium over the stock's Friday close. URS would also assume C$225 million in Flint debt as part of the transaction, the companies said in a joint statement.

San Francisco-based URS designs bridges and roads and the deal expands the company's presence in designing equipment and systems needed for extracting natural gas and oil from unconventional sources such as sand. URS' revenues from the oil and gas sector will increase to about 22 percent of total revenues following the transaction, the company said. "Through this combination, URS will be well positioned in segments of the oil and gas industry that we expect to have attractive margins and growth rates," URS Chief Executive Martin Koffel said in a statement.

The company, which competes with Jacobs Engineering Group Inc and Fluor Corp, expects the deal to add 20-30 cents a share to its full-year earnings. URS expects 2012 revenue of $9.9 billion-$10.1 billion and a profit of $3.95-$4.05 per share on a standalone basis. Calgary, Alberta-based Flint, which has about 10,000 employees, gets about 80 percent of its revenue from Canada and the rest from the United States. In November last year, Flint said it expects its drilling activity in Canada and the United States to rise 10 percent and 12 percent, respectively, in 2012. URS, which has about 47,000 employees, expects pre-tax cost synergies of $10 million to $15 million in 2012 from the deal. The deal will need to be implemented through a court-approved Plan of Arrangement under Canadian law and is subject to the approval of Flint security holders, relevant regulatory approvals and other customary closing conditions. URS expects to fund the deal using existing credit facility and a financing commitment for a new bridge facility. After closing the deal, Flint will become a new division of URS, led by Flint's Chief Executive William Lingard. In the event of a better offer by another suitor, URS will have a five-business-day right to match the offer. If the deal is not completed as a result of the offer, Flint has agreed to pay URS a termination fee equal to C$42 million.

Morgan Stanley & Co LLC acted as financial adviser and Osler, Hoskin & Harcourt LLP served as Canadian legal counsel for URS. Credit Suisse Securities (Canada) Inc was the financial adviser to Flint and Bennett Jones LLP served as legal counsel. URS shares closed at $42.91 on Friday on the New York Stock Exchange. Flint shares closed at C$14.90 on Friday on the Toronto Stock Exchange.

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TEXT-S&P rates URS Corp proposed notes 'BBB-'
Thu, Mar 08 14:22 PM EST

March 8 - Standard & Poor's Ratings Services today assigned its 'BBB-' issue-level rating to URS Corp.'s proposed senior unsecured notes due 2017 and 2022. The U.S.-based engineering and construction company expects to use the proceeds from this offering, as well as borrowings under its existing credit facility, to finance the acquisition of Flint Energy Services Ltd., to pay fees and expenses, and to repay some of Flint's outstanding debt. The proposed new notes contain a change-of-control provision. The 'BBB-' rating and stable outlook on URS reflect our assessment of the company's business risk profile as "satisfactory" and its financial risk profile as "intermediate" according to our criteria.

The debt-funded acquisition of Flint will stretch URS' credit measures temporarily. However, the ratings reflect our expectation that within 18 to 24 months, ratios will return to commensurate levels, including total debt to EBITDA(earnings before interest, taxes, depreciation, and amortization) of less than 3x and funds from operations (FFO) to debt of 30% or more.

((Definition of 'Funds From Operations - FFO'
A figure used by real estate investment trusts (REITs) to define the cash flow from their operations. It is calculated by adding depreciation and amortization expenses to earnings, and sometimes quoted on a per share basis.
Investopedia Says
Investopedia explains 'Funds From Operations - FFO'
The FFO-per-share ratio should be used in lieu of EPS when evaluating REITs and other similar investment trusts.

Read more: http://www.investopedia.com/terms/f/fundsfromoperation.asp#ixzz1srwTowBe
))

Following the acquisition, we expect URS to prioritize debt reduction to restore credit measures. Based on our expectation for annual free cash flow generation of about $400 million, we believe that the company should be able to restore credit ratios to less than 3x adjusted debt to EBITDA and FFO to debt of 30% or more by year-end 2013. This assumes that the company will pay down at least $350 million of debt over the next two years. Until then, we consider the company to have very limited capacity for acquisition spending in excess of $100 million or for share buybacks.

RELATED CRITERIA AND RESEARCH -- Research Update: URS Corp. 'BBB-' Rating Affirmed After The Company Announces Its Plan To Acquire Flint Energy; The Outlook Is Stable, Feb. 21, 2012 -- Business Risk/Financial Risk Matrix Expanded, May 27, 2009 -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 RATINGS LIST URS Corp. Corporate credit rating BBB-/Stable/-- Ratings Assigned Senior unsecured notes due 2017 and 2022 BBB- Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.


Definition of 'Secured Note'
A bilateral lending agreement, the note represents a contractual obligation to lend and borrow money at a specified interest rate.
Investopedia Says
Investopedia explains 'Secured Note'
This is just a standard lending agreement. Secured notes can be modified to have additional restrictions added to them in order to increase the value and decrease the default risk.

Read more: http://www.investopedia.com/terms/s/securednote.asp#ixzz1ss39HJ1y

Unsecured Loan
A loan that is issued and supported only by the borrower's creditworthiness, rather than by some sort of collateral.



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Posted by Thaqalain at 2:11 PM
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