Engineering giant Worley Parsons will double in size after buying Jacobs Engineering Group’s energy, chemicals, and resources division for a cash and debt-free enterprise value (including debt) of $US3.3 billion ($4.6 billion).
The acquisition will be funded by an underwritten accelerated non-renounceable entitlement offer of $2.9 billion, issuing $985 million in stock to Jacobs and $895 million of additional debt.
It will increase the company’s exposure to chemicals on top of the oil production and distribution businesses it already owns.
The combined group will have aggregated revenues of $9.15 billion, almost double WorleyParsons’ current revenues of $4.6 billion.
It also makes it more difficult for WorleyParsons’ biggest shareholder, Dubai-based Dar Group, to launch another takeover bid for the Australian company.
Dar has built a 25.9% stake in WorleyParsons as at July 31 and can’t increase that stake until next January under takeover rules.
The issue will water down Dar’s stake unless it decides to participate in the issue.
The shares issued to Jacobs will be at a price of $16.92 a share, which is equal to the theoretical ex-rights price. Worley shares closed at $17.84 on Friday.
Jacobs will own approximately 11% of the enlarged WorleyParsons post-transaction and these shares will be held in escrow until the later of 6 months post completion and August 31, 2019.
Worley said the additional debt will be funded via a bridge loan and will be replaced with longer-term debt financing from banks and/or capital markets.
Jacobs ECR is a leading global technical services provider across hydrocarbons, chemicals, and mining & minerals.
“Jacobs ECR has a global footprint with long-term, blue-chip client relationships in key strategic markets, most notably the US, Canada, the Middle East, and India. The business has more than 30,900 employees in 27 countries as of September 2018,” Worley’s statement said yesterday.
“Jacobs ECR is ranked number one globally for its delivery of complex petrochemical and chemical projects, its maintenance, modifications and operations (“MMO”) for hydrocarbons projects, including onshore and offshore production facilities and integrated project delivery, construction and technical services. It is ranked number two for its work in the refining industry,” according to the statement.
Jacobs ECR had aggregated revenue and pro forma EBITDA of US$3.4 billion and US$286 million respectively in 2018.
WorleyParsons said yesterday it expects run-rate cost synergies of approximately $130 million a year, which are expected to be achieved within two years.
“One off cost synergy implementation costs are estimated to be approximately $160 million. It is also anticipated that further benefits will be achieved from optimization and revenue synergies. Optimization will be facilitated via a step change in low-cost delivery capability through increasing Indian Global Integrated Delivery (“GID”) capacity by approximately 3,000 staff,” the statement claimed.
WorleyParsons CEO Andrew Wood said: “The acquisition of Jacobs ECR is important for our customers, shareholders, and employees. We are excited to combine Jacobs ECR’s world-class capabilities with our global platform to create a leader across our key focus sectors, with greater earnings diversification and resilience.”
“The transaction will bring complementary capabilities in key business lines, including a best-in-class onshore and downstream MMO capability, allowing customers to benefit from an expanded integrated solutions offering. Shareholders will have exposure to material EPS accretion, a strong long-term growth outlook, and a conservatively leveraged balance sheet, while our employees will have increased opportunity for development as part of the leading global project delivery provider in our sectors.”
