- Combination strongly supported by CH2M
shareholders with approximately 96 percent affirmative vote.
- Strengthens Jacobs’ diversified and
differentiated leadership position, providing innovative
government, infrastructure and industrial professional
services.
- Establishes Jacobs as a global design
leader in the industry, offering greater opportunities for
employees as well as enhanced services to our clients.
- Reaffirms fiscal 2018 adjusted EPS
guidance of $3.55 to $3.95. The combination is expected to be 15
percent accretive to Jacobs’ adjusted earnings per share in the
first full year after closing1 and 25 percent accretive when
further excluding the impact of amortization from CH2M purchase
intangibles.
- Increases Jacobs’ proportion of higher
growth, higher margin business while maintaining its lower-risk
portfolio and investment-grade credit profile.
- Announces intention to streamline
operating model into three global lines of business, including:
Aerospace, Technology, Environmental and Nuclear (ATEN); Buildings,
Infrastructure and Advanced Facilities (BIAF); and Energy,
Chemicals and Resources (ECR).
- Former CH2M board member Barry Williams
joins the Jacobs Board of Directors.
Jacobs Engineering Group Inc. (NYSE:JEC) today 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.
“This is a transformative step-change that brings together the
industry’s foremost expertise and services to fulfill our vision to
provide leading-edge solutions for a more connected, sustainable
world,” said Jacobs Chairman and CEO Steve Demetriou. “Since our
August announcement, we have held meetings with thousands of CH2M
and Jacobs employees, and I cannot overstate the enthusiasm we
share about our future together. Today, we are celebrating the
creation of a new Jacobs with even greater aspirations to do
meaningful work around the world, heartened by clients who have
eagerly anticipated this combination.”
Demetriou stressed the combined firm’s continuing emphasis on
talent retention and hiring as a top priority. “People are the
heart of our organization, and we are calling on the best and
brightest to join the new Jacobs to drive our growth strategy and
be part of our exciting future.”
Focused Integration Discipline
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.
“We are applying lessons learned from past integration
experiences and adopting best practices for critical factors, such
as talent retention, and building on the excellent cultural
foundations of both organizations,” said Demetriou. “We are well
positioned to capitalize on the differentiated value proposition
created by this combination, and our continued efforts to drive
incremental focus and accountability will be supported by a
simplification of our operating model. Most important, our clients
will be able to better realize the benefits of our
industry-leading, innovative capabilities.”
Reaffirms Financial Outlook
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 standalone 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 million 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 million 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 percent accretive to Jacobs’
adjusted earnings per share in the first full year after closing2
and 25 percent 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.
- Sustained financial flexibility:
Jacobs is maintaining its investment-grade credit profile upon
closing.
- Attractive risk profile: Jacobs
expects that after closing, approximately 85 percent of combined
revenues will be derived from lower-risk and reimbursable
contracts.
Focused and Simplified Operating Model
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.
Accelerating Opportunities for Profitable Growth in
High-margin Industries3
- Enhances position in infrastructure,
including water and transportation: Water represents an
approximately $100 billion-a-year opportunity, expected to grow at
a 4 to 5 percent compounded annual rate, presenting significant
potential to extend CH2M’s leadership in design, management and
lifecycle services for government and industrial clients, including
operations and maintenance, and resiliency services mitigating
climate threats. Jacobs is expected to benefit by expanding these
capabilities globally, backed by its strong operating and project
delivery platform. The combined company will have a leading global
water business with the scale, critical mass and experience to
capitalize on infrastructure and industrial growth trends.Jacobs
already is a global leader in the $300 billion-a-year
transportation sector, which includes highways, roads and bridges;
rail; aviation; and ports; growing at 4 to 5 percent on a
compounded annual rate. This sector’s significant investment
momentum hinges on population growth and unprecedented demands for
infrastructure development and improvement in all transportation
modes and geographies, particularly in the United States,
Australia, New Zealand, Southeast Asia, the Middle East and the
United Kingdom. The combination is expected to make the company an
employer of choice in the sector, where talent remains in high
demand, forged on a breadth of opportunities advancing the quality,
dependability and sustainability of infrastructure around the
world.
- Bolsters top-tier position in
nuclear and environmental services: Nuclear projects require
specialized capabilities that are difficult to replicate and
represent approximately $145 billion in annual opportunities,
growing 2 to 3 percent on a compounded annual basis. CH2M’s
preeminent position in program management of large-scale
environmental and nuclear remediation programs and Jacobs’
complementary experience with government agencies in nuclear
decommissioning together create significant business expansion
opportunities.Environmental work represents an approximately $160
billion annual opportunity, growing 4 to 5 percent on a compounded
annual rate. The combined company will have among the broadest and
deepest environmental technical and project delivery capabilities
in the industry. In addition, CH2M’s environmental expertise
complements Jacobs’ existing business with the U.S. federal
government, positioning the combined company with leading
capabilities for government clients that also are transferable to
private-sector clients, creating opportunities for substantial
upside potential for the company.
- Expands leadership in growing
industrial sectors: The combination brings together preeminent
engineering expertise and proven program- and
construction-management capabilities, delivering advanced
manufacturing and industrial technologies for diverse sectors,
including consumer products, life sciences, pharmaceuticals,
material sciences and semiconductors.
- Enhances energy, chemicals and
resources portfolio: The transaction combines both firms’
proven engineering and construction management capabilities to
establish a differentiated, lifecycle-services offering for clients
in these sectors. It further enhances Jacobs’ position, effectively
moderating cyclical exposures with additional operational and
maintenance capabilities for upstream, midstream and downstream
clients, including critical infrastructure for major projects in
the oil, gas, refining, chemicals and mining industries.
CH2M Board Member to Join Jacobs’ Board
Jacobs increased the size of its Board of Directors to 11
members and appointed former CH2M director, Barry Williams, to
serve as a director of Jacobs.
Williams, who also serves as a director of Navient and several
non-profit organizations, is the retired managing general partner
of Williams Pacific Ventures, Inc. and retired director of the
PG&E, Simpson, and Northwestern Mutual boards. He also
previously served as president and CEO of American Management
Association International; senior mediator for JAMS/Endispute and
visiting lecturer for the Haas Graduate School of Business,
University of California; general partner of WDG, a California
limited partnership; and general partner of Oakland Alameda
Coliseum Joint Venture.
Advisors
For Jacobs: Perella Weinberg Partners LP and Morgan
Stanley & Co. LLC served as financial advisors to Jacobs, while
Fried, Frank, Harris, Shriver & Jacobson LLP and Wachtell,
Lipton, Rosen & Katz served as Jacobs’ legal counsel for the
transaction.
For CH2M: BofA Merrill Lynch and Credit Suisse served as
financial advisors to CH2M, while Latham & Watkins LLP and
Richards, Layton & Finger, P.A. served as CH2M’s legal
counsel.
About Jacobs
Jacobs leads the global professional services sector, delivering
solutions for a more connected, sustainable world. With $15.0
billion in combined revenue and a talent force more than 74,000
strong, Jacobs provides a full spectrum of services including
scientific, technical, professional and construction- and
program-management for business, industrial, commercial, government
and infrastructure sectors. For more information, visit
www.jacobs.com, and connect with Jacobs on LinkedIn, Twitter and
Facebook.
Forward-looking statements
Certain statements contained in this document constitute
forward-looking statements as such term is defined in Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and such statements
are intended to be covered by the safe harbor provided by the same.
Statements made in this press release that are not based on
historical fact are forward-looking statements, including the
anticipated benefits of the acquisition of CH2M and expectations
for future performance and earnings, including the company’s fiscal
2018 outlook. Although such statements are based on management's
current estimates and expectations, and currently available
competitive, financial, and economic data, forward-looking
statements are inherently uncertain, and you should not place undue
reliance on such statements as actual results may differ
materially. We caution the reader that there are a variety of
risks, uncertainties and other factors that could cause actual
results to differ materially from what is contained, projected or
implied by our forward-looking statements. For a description of
some additional factors that may occur that could cause actual
results to differ from our forward-looking statements see Jacobs’
Annual Report on Form 10-K for the period ended September 29, 2017.
Jacobs is under no duty to update any of the forward-looking
statements after the date of this press release to conform to
actual results, except as required by applicable law.
1 Adjusted earnings per share exclude transaction and
integration costs.2 Adjusted earnings per share exclude transaction
and integration costs.3 All business line opportunity figures:
Internal assessment and third-party research.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171217005106/en/
InvestorsJacobs Engineering Group Inc.Jonathan Doros,
817-239-3457jonathan.doros@jacobs.comorMediaCH2MLorrie Paul
Crum, 303-525-2916lorrie.crum@ch2m.comorJacobs Engineering Group
Inc.Salim Rahimi, 214-583-8428salim.rahimi@jacobs.com
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