WorleyParsons announced on Monday, 22nd October 2018, its acquisition of the energy, chemicals and resources (ECR) segment of Jacobs, a Texas-based professional service company, for $3.3 billion. The acquisition will cause WorleyParsons to double in size and bring in additional revenues of about $1.3 billion dollars (as of Q3 2018 reporting). For comparison, WorleyParsons had average quarterly revenue of about $1.2 billion. The ECR business delivers front-end studies, engineering, procurement, maintenance and construction services across oil and gas upstream (20%), refining (25%), chemical markets (35%), mining & minerals (20%).
Jacobs is divesting to focus on less cyclical businesses where it holds a greater market share and better margins, e.g. aerospace, nuclear, environment and infrastructure. It is also an optimization of Jacobs’s portfolio after they acquired the $4.5 billion dollar business CH2M in August 2017. With that move, the company grew its core offerings by 40% but grew its ECR business by just 10%.
With the new acquisition, WorleyParsons further strengthens its hydrocarbons group with a 65% growth. This also increases the company’s exposure to minerals, metals and chemicals by seven-fold. On top of this, WorleyParsons will triple its footprint in the US as Jacobs’s ECR business has 70% exposure to the US, and the rest is international.
This acquisition overshadows WorleyParsons acquisition of UK engineering firm Amec Foster Wheeler last year for $215 million. WorleyParsons now needs to focus on unlocking the communicated $92 million synergies to improve the 5% margin from the business they acquired. WorleyParsons enjoyed a 9% margin in 2018, and the future looks bright as they have now become a dominant player in the oil and gas, and metals and mining industry.
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