Jacobs acquires CH2M for £2.5bn

US-based engineer Jacobs has bought rival CH2M for $3.3bn (£2.5bn).

The deal means the two firms will form a giant consultancy operation, even larger than the recently completed merger of Canadian firm SNC Lavalin and Atkins, employing 74,000 people with a potentially combined turnover of $16.2bn (£12.3bn).

However, CH2M in its latest results for the year ended 30 December 2016 posted an operating loss of $240m (£181m) and Jacobs said the firm had a net debt of $416m (£315m). CH2M also reported revenue of $5.2bn (£4bn) for 2016.

Last month the firm was awarded a client advisory role to provide programme, project and cost management services on the potential £6bn revamp of the Palace of Westminster, while other current projects in the UK include Crossrail and London’s new super sewer the Thames Tideway Tunnel.

Both CH2M and Jacobs are working on Heathrow airport’s third runway expansion plans.

Jacobs said the acquisition would improve its position in the nuclear, environmental, industrial and petrochemicals markets.

The firm added that it expected to achieve £113m of annual efficiency savings by the end of the second year following the close of the acquisition, from “real estate, optimisation of corporate operations, alignment of organisational structures, procurement and IT systems”. However, the firm will incur approximately £170m in one-off costs to achieve these savings.

Jacobs’ chairman and chief executive Steve Demetriou said: “By increasing our industry reach and adding to our skills, this transaction enhances our value to our clients and bolsters Jacobs’ position as a premier consulting, design, engineering, construction, and operations and maintenance technical services firm.

“CH2M brings to Jacobs a talented, engaged team with capabilities and values that are very complementary to our own. This transaction is consistent with our M&A criteria, accelerating our ability to achieve our financial growth targets.”

Jacqueline Hinman, chairman and chief executive at CH2M (pictured), said: “Since late 2014, we’ve been transparent about our plans to pursue an ownership transition, providing sustained access to capital for growth. Considering all of the options, we focused on securing greater opportunities for our employees, delivering superior value to our clients and enhanced value for our stockholders.”

Jacobs in its annual results for 2016 reported revenue of $11bn (£8.3bn) and operating income of $339m (£256m).