Item 1.01 Entry into a Material Definitive Agreement
Agreement and Plan of Merger
On
August 1, 2017, Jacobs Engineering Group Inc. (Jacobs) entered into an Agreement and Plan of Merger (the Merger Agreement) with CH2M HILL Companies, Ltd., a Delaware corporation (CH2M), and Basketball Merger
Sub Inc., a Delaware corporation and direct wholly-owned subsidiary of Jacobs (Merger Sub).
Transaction Structure
Pursuant to and subject to the terms and conditions of the Merger Agreement, Merger Sub will merge with and into CH2M, with CH2M continuing as
the surviving corporation and becoming a wholly-owned subsidiary of Jacobs (the Merger). Pursuant to the terms of the Merger Agreement, at the effective time of the Merger (the Effective Time), each outstanding share of
common stock, par value $0.01 per share, of CH2M (CH2M Common Stock) (other than shares of CH2M Common Stock owned by (i) Jacobs, CH2M or any of their wholly-owned subsidiaries, which shares will be cancelled and will cease to exist
or (ii) any person who is entitled to and properly demands statutory appraisal of his, her or its shares of CH2M Common Stock under Delaware law) will be converted into the right to receive, at the election of the holder thereof in accordance
with, and subject to, the terms, conditions and procedures set forth in the Merger Agreement, in each case without interest the following consideration (the Merger Consideration): (i) the combination of (the Mixed
Consideration) (a) $52.85 in cash and (b) 0.6677 shares of common stock, par value $1.00 per share, of Jacobs (Jacobs Common Stock); (ii) $88.08 in cash (the Cash Consideration); or (iii) 1.6693
shares of Jacobs Common Stock (the Stock Consideration).
Pursuant to the terms of the Merger Agreement, at the Effective
Time, each outstanding share of preferred stock, par value $0.01 per share, of CH2M (CH2M Preferred Stock) will be deemed converted into shares of CH2M Common Stock pursuant to Section 2.2 of the Certificate of Designation of the
Series A Preferred Stock of CH2M, and such shares will be converted into the right to receive, at the election of the holder thereof in accordance with, and subject to, the terms, conditions and procedures set forth in the Merger Agreement, the
applicable Merger Consideration elected by such holder.
CH2M stockholders who elect to receive the Cash Consideration or the Stock
Consideration will be subject to proration to ensure that the aggregate number of shares of Jacob Common Stock to be issued by the Company in the Merger and the aggregate amount of cash to be paid in the Merger will be the same as if all electing
stockholders received the Mixed Consideration. Any CH2M stockholder who does not make an election will be treated as having elected to receive the Mixed Consideration.
Immediately prior to the Effective Time, each (i) outstanding share of restricted stock of CH2M (CH2M Restricted Shares),
(ii) restricted stock unit in respect of CH2M Common Stock that is not an Assumed Restricted Stock Unit (as defined below), (iii) performance stock in respect of CH2M Common Stock that is not an Assumed Performance Stock Unit (as defined
below), (iv) phantom stock right in respect of or economically linked to share of CH2M Common Stock, (v) option to purchase CH2M Common Stock, (vi) stock appreciation right in respect of CH2M Common Stock and (vii) any other
equity or equity-based award in respect of, linked to or denominated in in respect of CH2M Common Stock other than the Assumed Restricted Stock Units and Assumed Performance Stock Units (collectively, Company Accelerated Equity Awards)
will accelerate with respect to one hundred percent (100%) of the shares of CH2M Common Stock underlying such Company Accelerated Equity Award (treating for this purpose any performance-based vesting condition as having been attained at
target).
In addition, immediately prior to the Effective Time, each Company Accelerated Equity Award (other than CH2M
Restricted Shares which will be converted in the Merger pursuant to the terms described above) will be cancelled and exchanged for (i) any positive difference between the Mixed Consideration (valuing the Jacobs Common Stock in the Mixed
Consideration based on the VWAP, defined below) and the exercise price per share of CH2M Common Stock, if applicable thereto, multiplied by (ii) the total number of shares of CH2M Common Stock subject to such Company Accelerated Equity Award as
of immediately prior to such cancellation.
At Effective Time, each (i) restricted stock unit in respect of CH2M Common Stock granted
after February 28, 2017 (Assumed Restricted Stock Units) will be converted into a restricted stock unit on the same terms and conditions (including applicable vesting requirements) in respect of the number of shares of Jacobs Common
Stock equal to (a) the number of shares of CH2M Common Stock subject thereto immediately prior to the Effective Time, multiplied by (b) the Assumed Equity Award Exchange Ratio (as defined below) and (ii) performance stock unit in
respect of CH2M Common Stock granted after to February 28, 2017 (Assumed Performance Stock Units) will be converted into a restricted stock unit on the same terms and conditions (with vesting to occur in substantially equal
installments on each of the first three anniversaries of the original date of grant of the related Assumed Performance Stock Units, subject to such accelerated vesting, if any, provided to the holder thereof), in respect of the number of shares of
Jacobs Common Stock equal to (a) the number of shares of CH2M Common Stock that would have vested at the end of the performance period if target performance had been achieved immediately prior to the Effective Time, multiplied by (b) the
Assumed Equity Award Exchange Ratio. The Assumed Equity Award Exchange Ratio means (x) the sum of the cash and stock portions of the Mixed Consideration, divided by (y) the
volume weighted average trading price of Jacobs Common Stock on the New York Stock Exchange (NYSE) for the ten (10) consecutive trading days ending on the third complete trading day prior to (and excluding) the closing date (the
VWAP).
Conditions
The consummation of the Merger is subject to customary closing conditions, including: (i) the approval of the Merger Agreement by the CH2M
stockholders, (ii) the expiration or termination of applicable waiting periods under, or receipt of the applicable consents required under, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and certain foreign antitrust and
competition laws, (iii) the absence of any order, applicable law or other legal restraints of certain specified governmental authorities enjoining or otherwise prohibiting the consummation of the Merger, (iv) the accuracy of certain
representations and warranties of each of the parties contained in the Merger Agreement, subject to specified materiality qualifications, (v) compliance, in all material respects, by each of the parties with their respective covenants contained
in the Merger Agreement, (vi) the effectiveness of the registration statement on Form S-4 to be filed by Jacobs for the issuance of the Jacobs Common Stock in the Merger and the approval of the listing of such shares of Jacobs Common Stock on
the NYSE, (vii) the absence of a material adverse effect on either CH2M or Jacobs since the date of the Merger Agreement and (viii) the other conditions set forth in the Merger Agreement. The consummation of the Merger is not subject to a
financing condition.
Other Terms of the Merger Agreement
The Merger Agreement contains customary representations, warranties and covenants for a transaction of this nature, including the obligation of
CH2M to (i) carry on its business in the ordinary course during the period between the execution of the Merger Agreement and the consummation of the Merger and (ii) comply with certain other operating covenants, as set forth more fully in
the Merger Agreement.
The Merger Agreement also provides that as of the Effective Time, the number of directors constituting the Board of
Directors of Jacobs will be increased by one and that such vacancy shall be filled by one director from the CH2M board of directors who qualifies as an independent director under applicable NYSE rules.
The Merger Agreement also contains a customary no solicitation provision that, subject to certain exceptions, restricts
CH2Ms ability to (i) solicit, initiate or knowingly encourage any inquiries or submission that could lead to a takeover proposal or (ii) enter into, engage or participate in discussions or negotiations with, furnish any nonpublic
information relating to CH2M to, or execute any agreement with, third parties in connection with a takeover proposal. The no-solicitation provision is subject to a fiduciary out that permits CH2M, under certain circumstances and in
compliance with certain obligations, to terminate the Merger Agreement and accept a superior proposal upon payment to Jacobs of the termination fee discussed below.
The Merger Agreement also contains certain customary termination rights for both Jacobs and CH2M, including, among others, (i) the
ability of either Jacobs or CH2M to terminate the Merger Agreement if the Merger is not consummated on or before May 1, 2018, subject to the ability of either party to extend to August 1, 2018 to obtain relevant antitrust approvals,
(ii) the ability of CH2M to terminate the Merger Agreement, under certain circumstances and in compliance with certain obligations (including payment to Jacobs of the termination fee), to enter into an agreement for a superior proposal,
(iii) the ability of Jacobs to terminate the Merger Agreement due to a change in the recommendation of the CH2M board of directors with respect to the Merger, or (iv) the ability of either Jacobs or CH2M to terminate the Merger Agreement
if the approval of CH2M stockholders is not obtained. Upon termination of the Merger Agreement in specified circumstances, including in connection with clauses (ii), (iii) and (iv) above, CH2M may be required to pay Jacobs a termination
fee of $85,444,783.80.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety
by reference to the Merger Agreement, a copy which is filed hereto as Exhibit 2.1 and is incorporated herein by reference. The Merger Agreement is provided to inform investors of its terms and is not intended to provide any financial or other
factual information about CH2M, Jacobs or Merger Sub or to modify or supplement any factual disclosures about Jacobs or CH2M in their respective public reports filed with the SEC. In particular, the representations, warranties and covenants
contained in the Merger Agreement (i) were made only for purposes of that agreement and as of specific dates, (ii) were made solely for the benefit of the parties to the Merger Agreement, (iii) may be subject to limitations agreed
upon by the parties for the purposes of allocating contractual risk between the parties to the Merger Agreement rather than establishing those matters as facts and (iv) may be subject to standards of materiality applicable to the contracting
parties that differ from those generally applicable
to Jacobs or CH2Ms SEC filings. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement,
which subsequent information may or may not be fully reflected in public disclosures by Jacobs or CH2M. Accordingly, the representations and warranties in the Merger Agreement should not be relied on as characterizations of the actual state of facts
about Jacobs or CH2M.
Voting and Support Agreement
On August 1, 2017, in connection with the execution of the Merger Agreement, AP VIII CH2 Holdings, L.P. (the Stockholder),
entered into a Voting and Support Agreement with Jacobs (the Voting Agreement), pursuant to which the Stockholder, who owns 100% of the issued and outstanding CH2M Preferred Stock, which is convertible into approximately 18% of the
issued and outstanding shares of CH2M Common Stock as of the date hereof, has agreed to, among other things, vote all of its shares of CH2M Preferred Stock in favor of the adoption of the Merger Agreement and against any competing transaction. The
Voting Agreement will terminate upon the earlier of (i) the conclusion of the CH2M special stockholders meeting and (ii) the termination of the Merger Agreement in accordance with its terms.
The foregoing description of the Voting Agreement does not purport to be complete and is qualified in its entirety by reference to the Voting
Agreement, a copy which is filed hereto as Exhibit 2.2 and is incorporated herein by reference.
The Stockholder also approved CH2Ms
entry into the Merger Agreement in accordance with the requirements of the Certificate of Designation of the Series A Preferred Stock of CH2M.
Commitment Letters
In connection
with entering into the Merger Agreement, Jacobs entered into a commitment letter, dated August 1, 2017 (the Term Loan Commitment Letter), with BNP Paribas, BNP Paribas Securities Corp. and The Bank of Nova Scotia (such financial
institutions being referred to collectively as the Term Loan Commitment Parties), pursuant to which the Term Loan Commitment Parties have committed (the Term Loan Facility Commitment) to provide a three-year senior unsecured
delayed-draw term loan facility in an aggregate principal amount of $1.2 billion (the Term Loan Facility), the proceeds of which will be used to finance a portion of the Cash Consideration and related transactions and to pay related fees
and expenses. The Term Loan Facility Commitment Letter contains conditions to funding of the Term Loan Facility customary for commitments of this type.
Jacobs currently intends to obtain certain consents from the lenders party to its existing revolving credit agreement in connection with the
Merger (the Revolver Consents). Jacobs has entered into a commitment letter, dated August 1, 2017 (the Revolver Backstop Commitment Letter, together with the Term Loan Facility Commitment Letter, the Commitment
Letters), with BNP Paribas, BNP Paribas Securities Corp. and The Bank of Nova Scotia (such financial institutions being referred to collectively as the Backstop Commitment Parties) in order to backstop its existing revolving credit
facility in the event that Jacobs is not able to obtain the Revolver Consents. Subject to certain terms and conditions, the Revolving Backstop Commitment Letter requires the Backstop Commitment Parties to provide a senior unsecured revolving credit
facility in an aggregate principal amount of $1.6 billion (the Revolver Backstop Facility) to backstop Jacobs existing revolving credit agreement in the event that the Revolver Consents are not obtained. Subject to certain
exceptions, the Revolver Backstop Facility will have terms substantially consistent with Jacobs existing revolving credit facility, including as to maturity and interest rate. In the event the Revolver Consents are not obtained and Jacobs
enters into the Revolver Backstop Facility, borrowings thereunder will be used (i) to prepay all outstanding borrowings under Jacobs existing revolving credit agreement, (ii) to finance a portion of the Cash Consideration and related
transactions and to pay related fees and expenses and (iii) for other general corporate purposes. The Revolver Backstop Commitment Letter contains certain conditions to funding of the Revolver Backstop Facility customary for commitments of this
type.
The foregoing descriptions of the Term Loan Commitment Letter and the Revolver Backstop Commitment Letter do not purport to be
complete and are qualified in their entirety by reference to the full text of the Term Loan Commitment Letter and the Revolver Backstop Commitment Letter, which are attached as Exhibits 10.1 and 10.2 to this Form 8-K and incorporated herein by
reference.