Jacobs to sell energy unit to WorleyParsons for $3.3B

Jacobs Engineering Group Inc. agreed to sell its energy, chemicals and resources unit to Australia’s WorleyParsons Ltd. for $3.3 billion to focus on its higher growth and margin aerospace and infrastructure businesses.

Jacobs will get $2.6 billion in cash and about 58.2 million WorleyParsons shares, worth around $700 million and equal to about 11 percent of its stock, the Dallas-based company said in a statement. The deal is expected to close in the first half of 2019. By exiting the lower profit-margin energy business, the company can seek more work on projects currently being prioritized by national governments and commercial clients, such as NASA’s effort to go to Mars

The deal is part of Jacobs’ strategy to optimize its portfolio with a focus on higher-growth, higher-profit infrastructure and commercial projects, Chief Executive Officer Steven Demetriou said in a Bloomberg TV interview.

“So, buildings, infrastructure, advanced facilities and our aerospace, technology, environment and nuclear business, we feel that’s the place to be over the next many years,” Demetriou said. WorleyParsons will benefit from gaining more scale in the very competitive energy market, he said.

Shares climb

Jacobs rose 6.6 percent to $77.07 at 11:39 a.m. in New York. The company had risen 10 percent this year through Friday, compared with a 3.5 percent decline in the S&P Industrials index. WorleyParsons fell 3 percent Friday to A$16.92. Trading was halted Monday.

The price was 11.5 times the unit’s earnings before interest, taxes, depreciation and amortization, which is higher than current market valuation for similar businesses, Demetriou said. The unit includes Jacobs work in petroleum, chemicals and mining.

“From our standpoint, we feel like we got a very attractive premium value for our business,’’ Demetriou said.

Jacobs will have three to six months before the deal closes to determine how it wants to deploy the capital from the sale, he said. Jacobs would initially pay down floating-rate debt with the proceeds, the company said in the statement.

WorleyParsons’ biggest acquisition will be funded by a A$2.9 billion ($2.1 billion) entitlement offer at A$15.56 share, A$895 million in debt and the shares offered to Jacobs, according to the Sydney based company. Shares in WorleyParsons were suspended from trading on Monday pending completion of the capital raising. They closed on Friday at A$17.84 and have risen 24 percent this year.

The acquisition will boost earnings and give WorleyParsons businesses in 27 countries from the U.S. to India as well as key clients including ExxonMobil Corp. and Codelco, the company said. Its 2018 revenue is expected to be $3.4 billion on an aggregated, proforma basis.

The deal will “create a leader across our key focus sectors, with greater earnings diversification and resilience,” WorleyParsons Chief Executive Officer Andrew Wood said.

(By James Thornhill and Thomas Black)