In a US$3.3-billion deal, WorleyParsons will acquire the energy, chemicals and resources division of Jacobs Engineering Group.
Through the sale, Jacobs will gain US$2.6 billion in cash and US$700 million in WorleyParsons ordinary shares, with the transaction value representing more than 11.5 times the trailing 12-month adjusted EBITDA for the ECR business. Jacobs will also gain an 11-percent stake in the enlarged WorleyParsons, with the latter taking on US$634 million in additional debt for the acquisition.
Once the deal is completed, Jacobs will turn its sole focus to its aerospace, technology, environmental and nuclear (ATEN) division, along with buildings, infrastructure and advanced facilities (BIAF). The company refers to these as its “higher growth, higher margin lines of business.”
“For Jacobs, this transaction marks an inflection point in our portfolio transformation focused on more consistent, higher-margin growth as a leader solving the world’s critical challenges,” Jacobs Chairman and CEO Steve Demetriou said in a statement.
He added, “[t]he increased financial flexibility we gain from this sale better positions us to invest in our ATEN and BIAF businesses, focusing our premier talent and expertise on technology, innovation and sustainable solutions that are priorities for our infrastructure and government services clients.”
Australia’s WorleyParsons expects the deal to be completed within four to six months of the announcement, following regulatory approvals, and anticipates improved earnings in the 2019 fiscal year through growth in the resource and energy markets.
“The acquisition of Jacobs ECR is important for our customers, shareholders and employees. We are excited to combine Jacobs ECR’s world-class capabilities with our global platform to create a leader across our key focus sectors, with greater earnings diversification and resilience,” WorleyParsons CEO Andrew Wood said in a release.
“The transaction will bring complementary capabilities in key business lines, including a best-in-class onshore and downstream MMO capability, allowing customers to benefit from an expanded integrated solutions offering,” he continued.
WorleyParsons’ share price was sitting flat on the ASX at AU$17.84 as of 9:35 a.m. PST on Monday (October 22). Meanwhile, Jacobs was up 5.77 percent on the NYSE at US$76.45.
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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.