The government’s favourite infrastructure and engineering consultant, CH2M Hill, is to be taken over by its US rival in a $3.27 billion deal. A fortnight after The Times revealed that Jacobs had approached CH2M Hill, the two companies announced the transaction.
CH2M Hill is best known as the controversial delivery partner for the first phase of the government’s High Speed Two railway. Last month it landed the contract to oversee the redevelopment of the houses of parliament and it was one of the key players in the delivery of the 2012 Olympics.
The takeover of CH2M by Jacobs means that the ownership of both of Britain’s two key infrastructure and engineering consultancies has changed over the past month.
Atkins, which has played a crucial part on Crossrail and is playing a key role in the plans to construct the Hinkley Point nuclear power plant and a third runway at Heathrow airport, was quietly snapped up during the general election campaign by SNC-Lavalin of Canada. Both of those deals were in part driven by the high value pipeline of big engineering projects in Britain.
Jacobs said that it would be paying $2.85 billion for the equity of CH2M, which is 80 per cent owned by thousands of present and retired employees. A further 20 per cent is owned by the private equity firm Apollo, which provided a much-need cash injection for the business but demanded that CH2M Hill’s management either float or sell the business by the end of the decade.
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Including debt of more than $400 million takes the enterprise value of the deal to $3.27 billion. The equity is being paid 60 per cent in cash and 40 per cent in Jacobs’ shares, which are quoted in New York. The deal values CH2M shares at $88.08, a 73 per cent premium to where the shares were trading in CH2M’s stockholders’ internal market. That according to some analysts means Jacobs may be overpaying.
Jacque Hinman, CH2M’s chief executive who could take away tens of millions of dollars from the deal, said that selling to Jacobs meant she had delivered on her promises. “We’ve been transparent about our plans to pursue an ownership transition,” she said.
CH2M is based in Colorado. About 2,500 of its 20,000 employees are in the UK, a legacy of the 2011 takeover of Halcrow. That deal came with a £500 million Halcrow pension liability which casued a controversy when Ch2m argued that it had no duty to the Halcrow pensions. A deal to help keep the scheme out of the pension protection scheme was signed last year.
● SNC-Lavalin, the Canadian engineering group, has emerged as a frontrunner to buy the North Sea oil and gas businesses of Amec Foster Wheeler.
Just weeks after completing on the £2.1 billion takeover of Atkins, the UK’s leading engineering consultancy, SNC-Lavalin is again fishing in British waters as the competition authorities confirmed they want Wood Group to divest North Sea assets after its £2.2 billion takeover of Amec Foster Wheeler.
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The Competition and Markets Authority has ruled that the takeover by Wood Group could lead to “competition concerns . . . [as] the merger will reduce the number of players active in these markets from four to three”.
A combined Wood-Amec Foster Wheeler would control more than half the market in UK oil and gas services.
The CMA has called for remedies from Wood Group to resolve the competition concerns by next Wednesday.
City sources reckon there are several “strategic buyers” of the assets and sources have confirmed that a leading candidate is SNC-Lavalin.