WorleyParsons has entered into a binding agreement to acquire Jacobs energy, chemicals and resources (ECR) division, a leading global technical services provider across hydrocarbons, chemicals, mining and minerals.
ECR has a global footprint with long-term, blue-chip relationships in key strategic markets, most notably the US, Canada, the Middle East and India. The business has more than 30,900 employees in 27 countries.
Jacobs ECR is ranked number one globally for its delivery of complex petrochemical and chemical projects, its maintenance, modifications and operations (MMO) for hydrocarbon projects, including onshore and offshore production facilities and integrated project delivery, construction and technical services.
In combining the two complementary organisations, WorleyParsons will create a pre-eminent global provider of project and asset services in resources and energy and provide global sector leadership across hydrocarbons, chemicals, minerals and metals.
Andrew Wood, CEO, WorleyParsons, said: “We are excited to combine Jacobs ECR’s world-class capabilities with our global platform to create a leader across our key focus sectors.The transaction will bring complementary capabilities in key business lines, including a best-in-class onshore and downstream MMO capability allowing customers to benefit from as expended integrated solutions offering, while our employees will have increased opportunity for development as part of the leading global project delivery provider in our sectors.”
The transaction value is $3.3bn, consisting of $2.6bn in cash and $700mn in WorleyParsons ordinary shares. The transaction value represents a multiple of more than 11.5 times trailing twelve-month (TTM) adjusted EBITDA for the ECR business.
Following the completion of the transaction, Jacobs will be focused solely on its two higher growth, higher margin lines of business – aerospace, technology, environmental and nuclear (ATEN), and buildings, infrastructure and advanced facilities (BIAF).
"For Jacobs, this transaction marks an inflection point in our portfolio transformation focused on more consistent, higher-margin growth as a leader solving the world's critical challenges," said Jacobs chairman and CEO Steve Demetriou.
"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 to drive meaningful value creation."
"While we are in the process of finalising our fiscal 2018 results, our current view is materially consistent with previously announced guidance for the year," said Jacobs CFO Kevin Berryman. "In addition, we continue to believe that the adjusted EPS guidance provided for fiscal 2019 remains appropriate, keeping in mind that such guidance did not reflect any impact from the pending transaction announced today."
"Upon closing of this transaction, we plan to initially apply proceeds to pay down floating-rate debt," Berryman added. "Beyond that, our strong financial flexibility and free cash flow will support incremental profitable growth investments and capital returns to shareholders, consistent with our record of disciplined allocation yielding attractive growth and value creation. And of course, Jacobs will continue to benefit from our ECR business' earnings and cash flow through the closing of the transaction."
Upon closing, Jacobs expects to receive approximately $2.6bn in net proceeds from the transaction, which initially will be used to pay down floating-rate debt, while also maintaining a disciplined approach to deploy capital for increased shareholder value, including mergers and acquisitions. The company will provide further details about its capital allocation strategy, as well as its updated pro forma financial outlook, at the company's investor day on 19 February 2019.
Together, ECR and WorleyParsons will be a global leader with the talent, industry sector, customer and geographic diversity needed to compete and win. The structure of the transaction enables Jacobs to benefit from the near-term upside created by the combination and the oil and gas market recovery.
At the close of the transaction, Jacobs will receive approximately 58.2 million shares of WorleyParsons stock, which will equate to approximately 11% of WorleyParsons ordinary shares based on WorleyParsons' outstanding shares post-close. The shares will be subject to a six-month holding requirement (but not earlier than 31 August) following the transaction's closing.
The Jacobs board of directors and the WorleyParsons board of directors each have approved the transaction. The transaction is expected to close in the first half of calendar 2019, subject to customary closing conditions and regulatory approvals.
Perella Weinberg Partners is serving as financial advisor to Jacobs, and Fried, Frank, Harris, Shriver & Jacobson is serving as legal counsel.
Wachtell, Lipton, Rosen & Katz also served as legal advisor to Jacobs. Centerview Partners provided financial advice to the company.
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