June 4, 2010 / 11:08 AM / 7 years ago

UPDATE 3-Jacobs Engineering to buy TechTeam unit for $59 mln

3 Min Read

* Jacobs will buy 100 pct stock of TechTeam Govt Solutions

* TechTeam says deal to close in Q3

* TechTeam to use proceeds partly to repay debt

* Shares down 7 pct

(Adds analysts' comments, share movement)

By Divya Sharma

BANGALORE, June 4 (Reuters) - Construction services firm Jacobs Engineering Group Inc (JEC.N) agreed to buy a unit of TechTeam Global (TEAM.O) for $59 million in cash, to expand its government information technology (IT) business. The unit, TechTeam Government Solutions (TIGSI), is a 500-person information technology solutions company that provides support to federal, state and local government agencies, including the U.S. Army, Jacobs said in a statement.

Jacobs IT business is part of its technology services segment, which also includes hardware and software design, simulation and space optics design. Jacobs'shares, however, fell as much as 7 percent in afternoon trade Thursday partly because the news of the TechTeam deal came even as investors had expected Jacobs to be acquired.

The TIGSI deal wasn't the kind of needle mover that people had expected, Morgan Joseph & Co analyst Richard Paget said.

Jacobs' stock has had a positive run in the recent past on take-out speculation by private equity firm Blackstone a couple of months ago, Robert W. Baird analyst Andrea Wirth said.

The company's shares had risen 20 percent from the end of February to mid-May.

After the company pulled out of some investor conferences recently, the speculation revived, Wirth said.

But now people are assuming that the reason they backed out from the conferences was TIGSI's acquisition and the likelihood of Jacobs being taken out is off the table, Wirth said.

Jacobs pulled out of the Credit Suisse Group Engineering & Construction Conference on Thursday and next week's J P Morgan Diversified Industries Conference.

Jacobs could not be immediately reached for comment.

Separately, TechTeam said TIGSI contributed 36 percent, or $76 million, of its total revenue for the year ended Dec. 31, 2009.

"We intend to use the proceeds from the sale initially to eliminate our bank borrowings and increase our present cash position," TechTeam said in a regulatory filing.

The transaction is expected to close in the third quarter, TechTeam added.

Jacob's shares were trading down 7 percent at $40.77 Thursday afternoon on the New York Stock Exchange. They touched a low of $40.73 earlier in the session. Shares of TechTeam were up 15 percent at $5.97 on Nasdaq. (Reporting by Divya Sharma and Arnika Thakur in Bangalore; Editing by Aradhana Aravindan and Prem Udayabhanu)

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