Jacobs' (JEC) CH2M Buyout Approved By CH2M Shareholders

Jacobs Engineering Group Inc. (NYSE:JEC) and CH2M HILL Companies, Ltd. announced on Dec 13, that approximately 95.6% of CH2M HILL’s stockholders have approved the acquisition of CH2M HILL by Jacobs. The deal will be executed through a reverse subsidiary merger.

This deal was originally announced on Aug 2.

Update on the Acquisition Deal: Preliminary Results

In addition, the companies gave preliminary results of the merger consideration election held on the date. CH2M HILL’s stockholders, of record as on Dec 15, 2017, were to choose one of the three consideration options as their preferred mode of payment in exchange of each share held by them. The options included the Mixed Election Consideration — cash of $52.85 and 0.6677 of Jacob’s shares, the Cash Election Consideration — cash of $88.08, and the Stock Election Consideration — 1.6693 of Jacob’s shares.

As noted, shareholders holding approximately 9.3% of CH2M HILLS shares voted for the Mixed Election Consideration, 21.5% for the Cash Election Consideration and 66.8% for the Stock Election Consideration. Also, shareholders of roughly 2.4% shares did not make valid election and were considered to have chosen the Mixed Election Consideration. Based on these preliminary results, proration is likely be applied to the shareholders opting for the Stock Election Consideration.

What CH2M Buyout Means for Jacobs?

Per the agreement signed in August, Jacobs’ acquisition of CH2M HILLS will cost the company approximately $2.85 billion, of which roughly 60% will be paid in cash and the rest 40% in the form of shares. Upon completion of the transaction, CH2M HILLS shareholders will hold approximately 15% of Jacobs’ shares. As regard to the cash portion, Jacobs intends to finance $2.4 billion cash through cash on hand, existing revolving credit facility and new debt arrangements.

The acquisition will make Jacobs a premier $15 billion global solutions provider. It will widen the company’s product offerings to existing and new clients while will gain easy access to unexplored markets.

The company anticipates annual cost savings of $150 million by the end of the second year following the deal closure while related one-time costs are likely to amount to $225 million. By the end of the first year following the deal completion, the company anticipates the acquired assets to boost its adjusted cash earnings per share by 25% and earnings per share by 15%.

In the last three months, Jacob’s shares have yielded roughly 16.5% return, outperforming 11.2% gain of the industry it belongs to.



Zacks Rank and Key Picks

With approximately $8 billion market capitalization, Jacobs currently carries a Zacks Rank #3 (Hold). In the last 60 days, earnings estimates for the stock remained stable for both fiscal 2018 and fiscal 2019 at $3.44 and $3.82, respectively.

Jacobs Engineering Group Inc. Price and Consensus