Jacobs Engineering Group has entered into a definitive agreement to acquire the outstanding shares of CH2M Hill Companies, an Englewood, Colo.-based consulting and program management firm that is a leader in infrastructure, environmental, and government sectors.
Dallas-based Jacobs will finance this deal, valued at $3.27 billion (including assumption of $416 million of CH2M debt), with 60% cash and 40% stock. The firm has secured financing, including a $1.2 billion three-year term loan.
The acquisition is expected to close by the first quarter of 2018. It is subject to approval by CH2M’s shareholders that would own 15% of Jacobs’ stock upon consummation.
Jacobs is already a major player in the oil and chemicals sectors as a consultant, engineer, and project manager. Its other specialties include construction, aerospace, and defense.
In CH2M, Jacobs is acquiring a 71-year-old firm that is a leader in such areas as water infrastructure, transportation, industrial manufacturing, and environmental services.
CH2M, with more than 20,000 associates, is employee owned. It generates about $4.4 billion in annual revenue, with 73% of its business coming from consulting and program management. More than 70% of its clientele is local, state, or federal governments. Its adjusted cash flow, as of June 2017, was $323 million.
The combined company’s $15.1 billion in revenue could challenge AECOM as the world’s largest engineering firm, at a time when the Trump Administration has proposed, in general terms, an infrastructure construction and repair program in the U.S. that would include $1 trillion in public and private funding over a decade.
The combined company would be more heavily weighted toward building and infrastructure than Jacobs is currently. And the combination would surpass AECOM in global design revenue ($10 billion vs. $7.4 billion).
Buildings & Infratstructure would be a bigger part of Jacobs' portfolio if its merger with CH2M goes through. Image: Jacobs
“This is a major milestone for Jacobs and the industry,” proclaimed Steve Demetriou, Jacobs’ Chairman and CEO, during a webcast to provide analysts with details about the agreement. Demetriou was joined by Bob Pragada, President of Jacobs’ Buildings and Infrastructure & Industrial business unit; and Kevin Berryman, the firm’s EVP and CFO.
None of CH2M’s corporate officials participated in the webcast, and it’s not clear who from CH2M’s C-Suite would be staying on, or whether Jacobs intended to use CH2M’s brand for marketing purposes.
Demetriou did say, though, that one of Jacobs’ top priorities is “retaining talent,” and that the combination would create “career development opportunities” for the combined company’s employees. He also stated that it was not Jacobs’ intention to simply fold CH2M into its operations, but to take advantage of each company’s strengths to become “a premier end-to-end global solutions provider.”
Jacobs has formed an Integration Management Office, led by Gary Mandel and Lisa Glatch, EVPs with Jacobs and CH2M, respectively. The firm has also hired an outside consultant (which it did not identify during the webcast) to assist the merger. Demetriou will chair an executive steering committee set up to ensure a smooth transition and integration.
Another priority is to deliver cost and cost synergies. Jacobs executives made the point several times that there is minimal overlap in Jacobs’ and CH2M’s clientele and markets, and that both companies have pursued relatively low-risk business strategies that focus on profitability and margins. Pragada pointed specifically to Buildings, Infrastructure, Aerospace, and Technology as “higher margin” sectors that the combined company would pursue.
However, there will be streamlining if this deal goes through. Berryman said Jacobs projects this combination to produce $150 million in annual cost savings by its second full year. Berryman said “at least” 50 of the two firms’ locations worldwide present “combination opportunities.”
During the webcast, some analysts expressed skepticism about this merger, based on past AEC deals that didn't pan out as advertised, and on the fact that this deal makes Jacobs more design oriented.
Executives at Jacobs—which during its history has acquired more than 70 companies—countered that this deal has undergone extensive due diligence of all of CH2M’s projects. More to the point, they said the acquisition is a good fit for Jacobs’ broader three-year strategic growth initiative that began last year.
Demetriou assured analysts that his company has “the accountable leadership in place” to execute the CH2M deal, and to “create a new industry leader and stronger partner.”
Related Stories
| Sep 17, 2013
World's first 'invisible' tower planned in South Korea
The 1,476-foot-tall structure will showcase Korean cloaking technology that utilizes an LED façade fitted with optical cameras that will display the landscape directly behind the building, thus making it invisible.
| Sep 17, 2013
Complex stained glass restoration under way on Wisconsin Capitol Building
Work is under way at the Wisconsin State Capitol on an extensive $2.7 million, 14-month renovation to the skylights above the House and Senate chambers, along with the barrel vault skyline above the grand staircase and the panels in the rotunda dome.
| Sep 16, 2013
Study analyzes effectiveness of reflective ceilings
Engineers at Brinjac quantify the illuminance and energy consumption levels achieved by increasing the ceiling’s light reflectance.
| Sep 16, 2013
Does brainstorming work?
The idea-generating process known as brainstorming has come under some intense fire recently. Critics contend that it suspends much-needed criticism and conflict while suppressing the creative ideas of introverts.
| Sep 16, 2013
Passive solar, enhanced envelope crucial to Univ. of Illinois net-zero project
Passive solar strategies and an enhanced envelope are keys to achieving net-zero on the new 230,000 sf Department of Electrical and Computer Engineering building at the University of Illinois at Urbana-Champaign.
| Sep 16, 2013
Forty-three percent of energy leaders will invest more in efficiency next year (infographic)
Forty-three percent of energy leaders say their investment in energy efficiency next year is projected to be more than it was last year, according to survey results released today by Schneider Electric. Twenty-two percent said their projected investment would stay the same, and 10 percent reported their investment would be less than last year.
| Sep 16, 2013
Forty-three percent of energy leaders will invest more in efficiency next year (infographic)
Forty-three percent of energy leaders say their investment in energy efficiency next year is projected to be more than it was last year, according to survey results released today by Schneider Electric. Twenty-two percent said their projected investment would stay the same, and 10 percent reported their investment would be less than last year.
| Sep 16, 2013
Construction spending hits four-year high in July: AGC report
Total construction spending hit a four-year high in July as private residential and nonresidential activity increased while public spending declined, according to an analysis of new Census Bureau data by the Associated General Contractors of America. Association officials urged lawmakers in Washington to make infrastructure investment a top federal priority before funding runs out at the end of September.
Sponsored | | Sep 16, 2013
Channel glass welcomes Hollywood Casino visitors in style
Turning the site of an abandoned auto factory into a glamorous casino is no easy task. Pilkington Profilit™ low-iron, wave channel glass with a translucent metallic gold coating helped the design team for the Hollywood Casino in Columbus, Ohio, achieve this goal by capturing the golden age of Hollywood from the outside in.
| Sep 15, 2013
How to build a rainscreen using fiber cement panels - AIA/CEU course
This course will review the cause and effects of moisture intrusion and explain how fiber cement panels can be used as a rain screen to reduce moisture build-up, rotting interior walls, and mold growth.