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
| Aug 19, 2013
Integration of solar panels in building skin seen as key net-zero element
Recent high-profile projects, including stadiums in Brazil for the upcoming World Cup and Summer Olympics and a bank headquarters in the U.K., reflect an effort by designers to adopt building-integrated photovoltaics, or BIPV.
| Aug 16, 2013
Today's workplace design: Is there room for the introvert?
Increasingly, roaming social networks are praised and hierarchical organizations disparaged, as workplaces mimic the freewheeling vibe of the Internet. Research by Susan Cain indicates that the "openness" pendulum may have swung too far.
| Aug 16, 2013
$5,000 in prizes to be awarded at BD+C's U40 Leadership Summit
Do you have the next big idea for improving the performance of buildings and the built environment? BD+C's 3rd Annual U40 Leadership Summit is your chance to shine—and share in $5,000 in prizes.
| Aug 15, 2013
Design-build project delivery holds steady at nearly 40% of nonresidential construction: DBIA study
The Design-Build Institute of America (DBIA), the only organization that defines, teaches and promotes best practices in design-build, has released research indicating that design-build project delivery represents nearly 40 percent of total market share in the United States, based on dollar value at the end of 2012.
| Aug 15, 2013
What do LEED and black magic have in common? A project principal leverages PDFs to demystify it for us.
LEED has become a labyrinth of standards which requires a full-time translator and tour guide to navigate. Now with LEED v4 on the horizon, I’m curious to see if any progress has been made to make these standards more consumable and applicable to true innovations within the six areas of sustainability.
| Aug 15, 2013
Nonresidential construction finally gaining momentum: Gilbane summer economic report
Gilbane Building Company today announces the publication of the Summer 2013 edition of Construction Economics – Market Conditions in Construction. Based on an array of economic data, construction starts, and material cost trends, the data continues to show positive growth for the industry.
| Aug 14, 2013
Five projects receive 2013 Educational Facility Design Excellence Award
The American Institute of Architects (AIA) Committee on Architecture for Education (CAE) has selected five educational and cultural facilities for this year’s CAE Educational Facility Design Awards.
| Aug 14, 2013
Warehouses go vertical in NAIOP distribution/fulfillment center design competition
NAIOP, the Commercial Real Estate Development Association, has selected Ware Malcomb, a contemporary full-service architectural design firm headquartered in Irvine, California, and Riddell Kurczaba, a design consulting firm located in Calgary and Edmonton, Alberta, Canada, as winners of the 2013 Distribution/Fulfillment Center Design of the Future.
| Aug 14, 2013
Green Building Report [2013 Giants 300 Report]
Building Design+Construction's rankings of the nation's largest green design and construction firms.