Jacobs completes CH2M acquisition
DALLAS and DENVER — Jacobs Engineering Group Inc. announced the completion of its acquisition of CH2M via a cash and stock transaction. The combination, which received broad affirmative support from CH2M shareholders, is expected to further drive the company’s profitable growth strategy.
Jacobs formed an Integration Management Office (IMO) early in August to begin integration planning following the announcement of the proposed CH2M acquisition. The IMO identified rigorous processes and protocols to drive realization of cost and growth synergies, for which Jacobs’ executive team and Board of Directors will continue to provide active oversight.
Both organizations reported strong performance in 2017, bolstering confidence in prospects for enhanced value creation in the newly combined firm and reinforcing the expectations for integration synergies and returns on the transaction.
- Reaffirms fiscal 2018 outlook. The company reaffirms its previous fiscal 2018 outlook for both Jacobs as a stand-alone business and the expected contribution from CH2M, which translates to fiscal 2018 adjusted EPS of $3.55 to $3.95.2 This guidance includes a negative impact from the amortization from CH2M purchase intangibles. The outlook also incorporates standalone revenue growth ramping during the fiscal year in-line with the company’s previous expectations. Given the timing of the close, the company does not expect any material benefit from CH2M in its Q1 results.
- Significant cost savings. Jacobs expects to achieve an estimated $150 MM of annual run-rate savings by the end of the second year after closing, primarily from real estate, optimized organizational alignment and systems integrations. Jacobs expects to incur approximately $225 MM in one-time costs to achieve these ongoing savings. In addition, the company expects to incur other one-time costs associated with the acquisition, such as change in control payments, banking and legal fees.
- Earnings accretion. The transaction is expected to be 15% accretive to Jacobs’ adjusted earnings per share in the first full year after closing 2% and 25% accretive when further excluding the impact of amortization from CH2M purchase intangibles.
- Upside for profitable growth. The broader, combined solutions offering of the combined company, including CH2M’s proven leadership in program management and construction management, presents potential for longer-term revenue upside extending both companies’ complementary offerings across their combined client base and broader global footprint.
- Attractive risk profile. Jacobs expects that after closing, approximately 85% of combined revenues will be derived from lower-risk and reimbursable contracts.
The company expects to move to reporting results by three global business lines by the second half of fiscal 2018:
- Aerospace, Technology, Environmental and Nuclear (ATEN): serving global aerospace, automotive, defense, telecommunications, nuclear clients and the U.S. intelligence community, led by Terry Hagen.
- Buildings, Infrastructure and Advanced Facilities (BIAF): serving broad sectors including buildings, water, transportation (roads, rail, aviation and ports), and advanced facilities for life sciences, semiconductors, data centers, consumer products and other advanced manufacturing operations, led by Bob Pragada.
- Energy, Chemicals and Resources (ECR): serving energy, chemicals and resources sectors, including upstream, midstream and downstream oil, gas, refining, chemicals and mining and minerals industries, led by Vinayak Pai.
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