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
Reconstruction & Renovation | Aug 3, 2022
Chicago proposes three options for Soldier Field renovation including domed stadium
The City of Chicago recently announced design concepts for renovations to Soldier Field, the home of the NFL’s Chicago Bears.
Codes and Standards | Aug 2, 2022
New tools help LEED projects reach health goals
The U.S. Green Building Council now offers tools to support the LEED Integrative Process for Health Promotion (IPHP) pilot credit.
Market Data | Aug 2, 2022
Nonresidential construction spending falls 0.5% in June, says ABC
National nonresidential construction spending was down by 0.5% in June, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau.
K-12 Schools | Aug 1, 2022
Achieving a net-zero K-12 facility is a team effort
Designing a net-zero energy building is always a challenge, but renovating an existing school and applying for grants to make the project happen is another challenge entirely.
Healthcare Facilities | Aug 1, 2022
New Phoenix VA outpatient clinic is one of the largest veteran care facilities in the U.S.
The new Phoenix 32nd Street VA Clinic, spanning roughly 275,000 sf over 15 acres, is one of the largest veteran care facilities in the U.S.
Codes and Standards | Jul 29, 2022
Few projects and properties are being built beyond code
Clients and architects disagree on how well building to code provides resilience, according to a recent report by the American Institute of Architects (AIA) in partnership with Owens Corning.
Headquarters | Jul 29, 2022
Nike HQ’s newest, largest structure: the Serena Williams Building
In Beaverton, Ore., the new Serena Williams Building, at just over 1 million square feet, is the largest structure at Nike World Headquarters.
| Jul 28, 2022
Fanning Howey hires Dennis Bane, AIA, as Project Executive
Fanning Howey, an architecture, interiors and engineering firm specializing in learning environments, has hired Dennis Bane, AIA, ALEP, to serve as a Project Executive for the firm’s Indianapolis office.
Multifamily Housing | Jul 28, 2022
GM working to make EV charging accessible to multifamily residents
General Motors, envisioning a future where electric vehicles will be commonplace, is working to boost charging infrastructure for those who live in multifamily residences.
Urban Planning | Jul 28, 2022
A former military base becomes a substation with public amenities
On the site of a former military base in the Hunters Point neighborhood of San Francisco, a new three-story substation will house critical electrical infrastructure to replace an existing substation across the street.