Starboard urges AECOM to explore sale of construction unit

[June 20, 2019]  (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 http://www.starboardvalue.com/wp-content/uploads/Starboard_Value_LP_
Letter_to_ACM_CEO_and_
Board_06.20.2019.pdf 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, which holds a 4% stake in the company, said a sale of the management services unit was more preferable.

"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.

In 2018, AECOM earned revenues 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 competitors.

The company's shares were up 0.8% at $36.83 before the bell.

(Reporting by Debroop Roy and Sanjana Shivdas in Bengaluru; Editing by Shailesh Kuber)

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