Jacobs Engineering Group Inc. of Dallas announced Monday that it agreed to sell its energy, chemicals and resources segment to Australia-traded WorleyParsons Ltd. for $3.3 billion.
The deal includes $2.6 billion in cash and 58.2 million WorleyParsons shares worth around $700 million, which will give Jacobs an 11 percent stake in the company.
Jacobs will have to hold the shares for six months after the transaction’s closing, but not earlier than Aug. 31. The parties expect to close the deal in the first half of next year.
The transaction value represents a multiple of more than 11.5 times trailing 12-month adjusted Ebitda, Jacobs said. WorleyParsons said the multiple would go down to 8.5 times after A$130 million ($92.5 million) in expected cost synergies.
Jacobs senior VP and general counsel Mike Tyler turned to New York firms Fried, Frank, Harris, Shriver & Jacobson and Wachtell, Lipton, Rosen & Katz for outside counsel.
Tyler worked on the deal along with VP of legal Michael Bante and deputy general counsel and VP of corporate/securities Justin Johnson.
Larry Kalban is WorleyParsons’ general counsel and based at its U.S. headquarters in Houston.
Kalban tapped Baker Botts for outside counsel, including partner Efren Acosta, senior associate Laura Katherine Mann and associates Katie Belleville, Steven Lackey, Sunil Jamal and Ieuan List, all of Houston.
Texas specialists included tax partner Ron Scharnberg; employee benefits special counsel Chris Pratt; intellectual property partner Robinson Vu and associate Steve Maule; global projects partner Chris Wilson; and environmental partner Scott Janoe.
Attorneys in the firm’s Washington, D.C., and Brussels offices also pitched in.
Jacobs said the deal will help it focus on its two higher growth, higher margin lines of business: aerospace, technology, environmental and nuclear; and buildings, infrastructure and advanced facilities.
“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,” chairman and CEO Steve Demetriou said in a statement.
CFO Kevin Berryman said the company plans to use the proceeds to pay down its floating-rate debt.
The asset sale follows Jacobs’ purchase of rival CH2M Hill Cos. Ltd. in August of last year for $3.3 billion. WorleyParsons approached it about acquiring the business about 10 months ago.
For WorleyParsons, the transaction – which Bloomberg called “audacious” – will double its market capitalization and earnings, making it the world’s biggest provider of professional services in energy and resources.
The deal will boost WorleyParsons’ energy-related engineering capabilities in refining and petrochemicals and give it a large presence in Europe and North America, which will complement its exposure in the Middle East and Asia.
WorleyParsons is a quarter-owned by Dubai-based engineering company the Dar Group, which offered to buy the company in 2016 for $2.2 billion. WorleyParsons rebuffed it.
The buyer plans to fund the deal with a A$2.9 billion ($2 billion) entitlement offer and new debt, which will more than double its liabilities to A$1.5 billion ($1.07 billion).
UBS, which is leading the share sale along with Macquarie Capital, provided financial advice to WorleyParsons. Herbert Smith Freehills is issuer’s counsel on the entitlement offer.
Perella Weinberg Partners and Centerview Partners were Jacobs’ financial advisors.
Baird analyst Andrew Wittmann reiterated his outperform rating and $82 price target on Jacobs’ stock after the deal announcement. The company’s shares rose 6.82 percent on the news to $77.21.
Citigroup analyst Siraj Ahmed warned that Jacobs’ sales growth could be slower than WorleyParsons’ and that the deal had high integration risk due to people being the companies’ core asset, according to a report in the Australian Financial Review.
However, Ahmed said the combination would boost WorleyParsons’ exposure to improving market conditions in the oil and gas, metals and mining sectors, the report said.