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New £11bn business created as Jacobs buys CH2M in £2.47bn takeover deal

US engineering mega-firm Jacobs has bought CH2M in a takeover deal worth $3.27bn (£2.47bn).

The deal was confirmed today, following weeks of speculation that the two companies were in dialogue about a possible merger. That speculation intensified further after both firms declined to comment on the rumoured talks.

Jacobs, who say the buy-out will see the creation of a $15bn (£11bn) global business, has been reportedly keen to gain more market share in UK and international infrastructure. The takeover will see the formation of a 74,000-strong engineering consultancy to rival AECOM in size at $17bn.

The two firms have entered into a definitive agreement under which Jacobs will acquire all outstanding CH2M shares in a cash and stock transaction. The deal will see 60% paid in cash and 40% paid in Jacobs common stock. The transaction also includes £314m of CH2M’s net debt. 

Jacobs have said that they expect to make £113m of cost savings as a result of the merger. Savings are expected to come from real estate, optimisation of corporate operations, alignment of organizational structures, procurement and IT systems.

Jacobs said the deal brought together two “industry-leading, innovative companies with complementary capabilities, cultures and relationships”.

Jacobs chairman and CEO Steve Demetriou said: “By increasing our industry reach and adding to our already extensive skills, this transaction enhances our value to our clients and bolsters Jacobs’ position as a premier consulting, design, engineering, construction, and operations and maintenance technical services firm.

“CH2M brings to Jacobs a talented, engaged team with capabilities and values that are very complementary to our own. Together, we will bring more solutions to our clients, give more opportunity to our employees and create increased value for Jacobs’ shareholders. In addition, this transaction is consistent with our M&A criteria, accelerating our ability to achieve our financial growth targets and propelling Jacobs toward our vision of providing innovative solutions for a more connected, sustainable world.”

Jacobs has formed an integration management office (IMO) to oversee the integration of the two companies. The IMO will be jointly led by senior executives from both companies on a full-time basis, including Gary Mandel, most recently Jacobs president of petroleum and chemicals, who has been appointed executive vice president of integration for Jacobs, and Lisa Glatch, executive vice president for growth and sales at CH2M.

Commenting on the news of further consolidation in the consultancy and engineering sector, Nelson Ogunshakin, chief executive of the Association for Consultancy and Engineering, said: “We should not be surprised by this move by Jacobs and CH2M. Merger and acquisition is now an integral part of the corporate growth strategy for companies regardless of size and sector and we have seen a surge in M&A activity amongst firms of all sizes in our sector recently.

“Whilst this trend is likely to continue for the foreseeable future, I don’t believe that it will impact on firms’ ability to deliver for their clients. The Jacobs/CH2M deal brings together two industry-leading, innovative companies with complementary capabilities, cultures and relationships and will result in a more differentiated, value proposition for clients and an enhanced platform for the new organisation’s sustainable, profitable growth.”