(Reuters) - Jacobs Engineering Group Inc JEC.N, which designs highways, bridges and airports, said it would buy rival CH2M Hill Cos Ltd in a $3.27 billion cash-and-stock deal to bolster its reach in the high-margin government services and infrastructure sectors.
Jacobs’ shares rose as much as 2.4 percent to $54.50 in morning trading on Wednesday.
The deal comes at a time when construction and engineering companies in the United States are expected to benefit from President Donald Trump's proposed $1 trillion infrastructure-spending plan. (reut.rs/2uUHTSQ)
Dallas, Texas-based Jacobs has a dominant presence in the petroleum and chemicals sector, where it provides consulting, engineering, maintenance and project management services.
Jacobs also provides construction, nuclear and technical support services to the aerospace and defense sectors.
Englewood, Colorado-based CH2M Hill, a leader in the infrastructure and government service sectors, including water, transportation, environmental and nuclear, had a trailing 12-month revenue of $4.4 billion, Jacobs said.
The deal would more than double Jacobs’ revenue from its buildings and infrastructure business.
About 60 percent of the equity value of the $2.85 billion deal would be paid in cash, and 40 percent in Jacobs’ common stock, the company said.
Jacobs said it would finance the cash portion of the deal with cash on hand, borrowings under its existing revolving credit facility and $1.2 billion new debt arranged by BNP Paribas and the Bank of Nova Scotia.
The deal would add about 15 percent to Jacobs’ adjusted earnings per share and 25 percent to its adjusted cash earnings in the first full year, following its close in December 2017.
Jacobs said it would be able to save $150 million in costs by the end of the second year.
CH2M stockholders would own 15 percent of Jacobs’ shares.
Perella Weinberg Partners LP and Morgan Stanley and Co LLC served as financial advisers to Jacobs, while BofA Merrill Lynch and Credit Suisse advised CH2M.
Reporting by Ankit Ajmera and Arunima Banerjee in Bengaluru; Editing by Saumyadeb Chakrabarty and Martina D'Couto