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Jacobs to Buy John Wood Group's Nuclear Business for $300M

Zacks Equity Research

Jacobs Engineering Group Inc. JEC has signed an agreement with U.K. energy services company, John Wood Group, to acquire the latter’s Nuclear business. This move will further strengthen Jacobs’ position in highly profitable and complementary sectors within nuclear and defense. The deal, which is expected to close by second-quarter fiscal 2020, is subject to customary closing conditions that include regulatory approvals.

Terms of the Deal

Jacobs will buy the Nuclear business for approximately $300 million (£250 million) on a debt-free, cash-free basis. It expects to finance the transaction, which represents an enterprise value-to-expected pro forma calendar year 2019 adjusted EBITDA multiple of 7.9x, through cash on hand and existing credit facilities. The company assumes $12 million of full run-rate cost synergies from the combined organizations.

How Will This Buyout Help Jacobs?

The Wood Nuclear business designs, delivers, and maintains strategic and complex nuclear assets, primarily in the U.K. This business, having approximately $285 million of expected 2019 revenues (on a calendar year basis), provides program management technical and consulting services in areas like decommissioning, nuclear new build and operational support in civil nuclear and defense segments.

This Wood Nuclear business addition is a strong strategic fit for Jacobs’ Aerospace, Technology & Nuclear (“ATN”) line of business. This acquisition will give Jacobs an important platform for growth in nuclear and defense across the U.K., and more access to Europe and Asia. The buyout will boost Jacobs' current $1.2 billion nuclear portfolio and support its sustainability agenda of managing technically complex projects in cleaner energy, nuclear clean-up and environmental remediation.

Acquisitions – A Key Growth Strategy

Jacobs, which shares space with KBR, Inc. KBR, AECOM ACM and Altair Engineering Inc. ALTR in the Zacks Engineering - R and D Services industry, is reinforcing business on the back of meaningful acquisitions. In sync with this, Jacobs acquired KeyW in June 2019, thereby enhancing the higher-margin ATN/government services business through intelligence solutions capabilities in high-security clearance areas. KeyW, which provides engineering/technology solutions in intelligence, cyber and related national security concerned areas for the U.S. government, will compliment Jacobs' ATN segment.

This Zacks Rank #2 (Buy) stock has outperformed the industry year to date. Improved segmental performances, solid backlog, inorganic drives and efforts to focus on high-value business will likely improve Jacobs’ near-term results. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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