Dallas-based Jacobs Engineering Group is making moves to garner more government and infrastructure work, with its plans to buy the Englewood, CO-based CH2M Hill Cos., according to The Wall Street Journal. The deal is expected to close by the end of this year.
The $2.85 billion deal, which grows to $3.27 billion with the addition of $416 million of CH2M’s net debt, is structured as 60% cash and 40% Jacobs stock. It values CH2M at $88.08 a share. Jacobs expects the addition of CH2M’s expertise to lead to $150 million in cost savings annually.
Three-quarters of CH2M’s business is in North America, according to the Dallas Morning News. CH2M has roughly 20,000 employees, and it posted revenues of $5.2 billion in 2016. The combined firms expect to see annual revenues of $15.1 billion.
The move sees Jacobs gearing up for an anticipated massive federal infrastructure spend, although those details have been slow to come from the Trump administration. The latest reports suggest that debate on an infrastructure bill could be put on the backburner until 2018.
Yet Jacobs had an attractive offer in CH2M. Engineering News-Record previously reported that Jacobs could be lining up to buy CH2M, which it indicated could be struggling financially even after private equity investor Apollo Global Management gave it a $300 million boost in 2015. CH2M’s switch to fixed-price contracts contributed to $351 million in losses from 2014 to 2016, spurring the company to restructure and consider a sale. The preferred stock deal with Apollo gave the PE firm a roughly 20% stake in the business and was seen by some analysts as a catalyst for the Jacobs deal.
CH2M ranked No. 3 on ENR’s 2017 list of the top design firms, following Jacobs at No. 2 and AECOM in the No. 1 spot. While Jacobs and CH2M expect to have annual revenue around $15.1 billion post-acquisition, AECOM posted revenues of $17.4 billion in 2016. CH2M was also one of seven major commercial engineering and construction firms to make this year’s Fortune 500, coming in at No. 494, down 16 spots from 2016. Jacobs ranked No. 259 on Fortune’s list, down 24 spots year-over-year.
In May, CH2M won a $57 million contract from the Massachusetts Bay Transportation Authority to oversee the $2.2 billion Green Line light-rail extension project near Boston. The contract runs from June 2017 to December 2022.