Global firm Jacobs Engineering Group Inc. has entered into a definitive agreement under which it will acquire all outstanding shares of international consultant CH2M.
The cash and stock deal has an enterprise value of about $3.27 billion, including $416 million of CH2M net debt, creating what Jacobs is calling a “$15 billion global solutions provider.”
“Together, we will bring more solutions to our clients, give more opportunity to our employees and create increased value for Jacobs’ shareholders,” Jacobs chair and CEO Steve Demetriou said. “In addition, this transaction is consistent with our mergers and acquisition criteria, accelerating our ability to achieve our financial growth targets and propelling Jacobs toward our vision of providing innovative solutions for a more connected, sustainable world.”
The deal will not be subject to a financing condition, Jacobs said, with the Dallas-based company expected to finance the $2.4 billion transaction through a combination of cash on hand, its existing revolving credit facility and $1.2 billion from a new three-year term debt arranged by BNP Paribas and the Bank of Nova Scotia. Jacobs said it expects to have about $900 million in remaining liquidity after the deal is closed.
CH2M, headquartered in Denver, has reportedly been considering such a merger since late 2014.
“We’ve been transparent about our plans to pursue an ownership transition, providing sustained access to capital for growth,” CH2M chair and CEO Jacqueline Hinman said. “Considering all of the options, we focused on securing greater opportunities for our employees, delivering superior value to our clients and enhanced value for our stockholders.”
Though the opportunity to expand water, transportation, petroleum and chemical operations was a key factor in the acquisition, Jacobs said the companies’ combined capabilities in the environmental sector was particularly appealing.
“Environmental work represents an approximate $160 billion opportunity, growing 4% to 5% on a compounded annual rate,” the company said. “CH2M’s environmental expertise builds on Jacobs’ existing U.S. federal client base, positioning the combined company to be a stronger partner for global government clients.”
The merger will be overseen by a newly-formed “Integration Management Office”, which will be led by executives Gary Mandel of Jacobs and Lisa Glatch of CH2M.
“Jacobs and CH2M have complementary cultures and shared values that put people at the heart of the business,” Demetriou said. “With this foundation and the clear integration plan we have developed, we expect to successfully bring our companies together.”
The transaction is expected to close during the first quarter of Jacobs’ 2018 fiscal year, but must first receive regulatory and CH2M stockholder approval.
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