US's Jacobs sells energy, chemicals unit to Worley Parsons for $3.3bn
The US firm expects to benefit from the transaction amid the oil and gas market's "recovery"
Texas-headquartered engineering group Jacobs confirmed the sale of its energy, chemicals, and resources (ECR) business unit to Australian stock exchange-listed Worley Parsons in a transaction valued at $3.3bn, comprising $2.6bn in cash and $700m in the Sydney-based company’s ordinary shares. The US firm is optimistic about the transaction’s impact as the oil and gas market makes a “recovery”.
ECR and Worley Parsons’ unification is expected to create “a global leader with the talent, industry sector, [and] customer and geographic diversity needed to compete and win”, according to Jacobs’ statement.
Meanwhile, Jacobs expects to benefit from the transaction’s structure that allows it “to benefit from the near-term upside created by the combination” of ECR and Worley Parsons, and “the oil and gas market recovery”.
The respective boards of directors of Jacobs and Worley Parsons have approved the transaction, which is expected to complete in H1 2019, subject to customary closing conditions and regulatory approvals.
Jacobs will now focus “solely on its two higher growth, higher margin lines” of operations, which include aerospace, technology, environmental, and nuclear (ATEN) in one unit, and buildings, infrastructure, and advanced facilities (BIAF) in the other.
The sale follows Jacobs’ acquisition of CH2M through a cash and stock transaction that was completed late in December 2017. Jacobs announced the streamlining of its businesses into the ECR, ATEN, and BIAF models in the same month.
In a statement, Jacobs said the transaction’s value “represents a multiple of more than 11.5 times” for the ECR business’s trailing twelve-month adjusted earnings before interest, tax, depreciation, and amortisation (Ebitda).
The transaction’s completion will see Jacobs receive approximately 58.2 million shares of Worley Parsons’ stock. This equates to almost 11% of its ordinary shares, and will be subject to a six-month holding requirement following the transaction’s closing.
Steve Demetriou, chairman and chief executive officer of Jacobs, said the transaction “marks an inflection point in [the company’s] portfolio transformation”, which is focused on “more consistent” and “higher-margin growth”.
He added: “The increased financial flexibility we gain from this sale better positions us to invest in our ATEN and BIAF businesses, focusing our premier talent and expertise on technology, innovation, and sustainable solutions that are priorities for our infrastructure and government services clients.
“These capabilities, along with our strong backlog and efficient global platform, will further strengthen our global leadership in these segments.”
Jacobs will report its 2018 fiscal results on 20 November, its statement added.
A heavyweight in various construction disciplines, Jacobs teams are prominent across the Middle East’s key engineering markets, especially Saudi Arabia. This August, subsidiary Jacobs Zate was awarded a two-year contract renewal for work on a Satorp refinery in Saudi’s Jubail Industrial City 2. The deal followed Jacobs’ winning bid – announced this June – for a three-year contract to work on an oil refinery for Yanbu Aramco Sinopec Refining Company, and a “landmark contract” from Saudi Aramco for its Zuluf oil and gas project, revealed this April.
In July 2018, Jacobs said it had been selected to deliver critical technical and programme consulting services for the UAE’s pivotal freight and passenger railway project, Etihad Rail.