Dallas-based Jacobs Engineering Group announced on Oct. 22 the latest move in its "portfolio transformation" focus on higher-margin businesses, with an agreement to sell its energy, chemicals and resources division to Australia's WorleyParsons for $3.3 billion.
"The increased financial flexibility we gain from this sale better positions us to invest" in the design-build giant's aerospace, technology, government services, nuclear and environmental unit and its infrastructure and advanced facilities group, said Jacobs Chairman and CEO Steve Demetriou.
WorleyParsons believes "hydrocarbons and minerals and metals are both coming off the bottom. It is an exciting time for the sector,” CEO Andrew Wood told investors in an Oct. 22 conference call related to the cash-and-stock transaction.
Jacobs is the top-ranked firm on ENR's list of the Top 500 Design Firms, reporting $9.76 billion in 2017 revenue, about $3.8 billion outside the U.S. About 31% of that is in the industrial and petroleum sector. It also ranks at No. 118 on the Top 250 Global Contractors list, reporting $2.5 billion in construction revenue worldwide, 72% in industrial and petroleum markets.
WorleyParsons ranks at No. 28 on the Top 500 list with about $618 million in reported global design revenue and among the Top 250 Global Contractors, with $841 million in worldwide construction revenue.
"We've anticipated that Jacobs would sell this lower-margin, higher-risk and heavier-construction-focused oil and gas business in line with its strategy announced a couple of years ago," said Andrew Wittmann, construction sector lead analyst for Baird Equity Research in an Oct. 22 note. "The materiality of this transaction is even more significant for [Worley-Parsons] where [net profit] and headcount essentially double. It will raise $636 million of fresh debt and $2 billion of cash in a rights offering to fund the cash portion."
He said about 30,900 employees would transfer when the deal is completed before mid-year 2019, with about 60% in professional-technical roles based globally and 40% in construction trades in North America.
Jamie Cook, lead sector analyst for Credit Suisse, noted the "rich multiple" for Jacobs' energy and chemicals group in the planned deal and added that future acquisitions may be "on the table as [the company] looks to continue to shift the portfolio towards government IT services and water/infrastructure markets."
Jacobs will report results for fiscal 2018 on Nov. 20.
Read more on WorleyParsons strategy in approaching Jacobs to ink the deal.