This story was updated throughout at 5 p.m.
Dallas-based Jacobs Engineering Group Inc. announced one of the engineering industry's largest deals ever Wednesday with its $2.85 billion purchase of Colorado-based CH2M.
Including $416 million of CH2M's net debt, the deal's value totals $3.27 billion.
The cash-and-stock acquisition is a move by Jacobs to capture more of the highways, bridges and airport work that's expected to come from President Donald Trump’s promised $1 trillion infrastructure-spending plan. Jacobs expects to close the deal with CH2M by the end of its first quarter in fiscal year 2018, which ends at the close of 2017.
In buying CH2M, Jacobs will look to grow its businesses in the water, nuclear and transportation sectors, executives said in a conference call Wednesday morning. They expect combined revenue of $15.1 billion, split among buildings and infrastructure; aerospace and technology; petroleum and chemical; and industrial, with each sector accounting for at least 22 percent of revenue.
Jacobs will combine the two companies' corporate centers in Dallas. Jacobs, founded in 1947 in Pasadena, Calif., moved its headquarters to Dallas last fall.
"There's a significant opportunity to grow both our Dallas and Fort Worth operations, which means creating jobs," Jacobs CEO Steve Demetriou said in a phone interview Wednesday.
He did not provide specific numbers related to job growth but said that will be explored over the next three to four months as Jacobs develops its integration strategy.
Employee-controlled CH2M's 20,000 employees will join with Jacobs' base of 54,000 employees. Gary Mandel, Jacobs' president of petroleum and chemicals, will move from Houston to Dallas to lead the integration of the companies. Vinayak Pai will take over responsibilities as interim head of global petroleum and chemicals in Houston, Jacobs' petroleum headquarters.
Jacobs said the deal will result in annual savings of $150 million. The engineering giant has secured financing for the deal, which will be 60 percent cash and 40 percent Jacobs stock.
Both companies work in design services. Broadly, Jacobs' work serves markets in infrastructure, aerospace and technology, which includes a lot of federal government services work, Demetriou said. The company's projects touch industries spanning petroleum and chemicals, mining, pharmaceuticals, architecture, design and construction management.
CH2M, formerly known as CH2M Hill, has been involved in large projects such as the Panama Canal expansion, the 2012 Olympic Games in London and the Parliament refurbishment.
Most of its business is consulting and project management for the environment and nuclear, water, transportation, and energy and industrial sectors. Seventy-five percent of its business comes from North America.
The Englewood, Colo.-based company brought in $5.2 billion in revenue last year, but its revenue has declined over the past couple of years. It also faces liabilities on some of its current contracts.
When asked in the conference call about what percent of CH2M is unprofitable, Jacobs chief financial officer Kevin Berryman said CH2M is "getting to a place where ongoing operations are effectively mostly profitable."
Jacobs executives did not provide financial details of CH2M's ongoing contracts, but they've taken into account the costs associated with them, Berryman said.
Jacobs relocated about 100 headquarters employees from Southern California to Dallas in October. It already had about 300 employees working in Dallas, which is one of its more than 230 offices globally.
Jacobs' third-quarter earnings are scheduled to be released Tuesday. Its 2016 revenue totaled $10.9 billion.
Facebook: Tracy M. Cook / Twitter: @tmcook23
